US Trade Balance deteriorates; 2Q GDP to be revised down

Americans increased their consumption of foreign goods in June, today’s report shows. The trade deficit surged to $49.9 billion in June (Saxo Bank and consensus: -$42.1 billion) from $42.0 billion in May, the largest deficit in almost two years. Declining goods exports could be another sign that the pace of the global recovery is slowing down resulting in less demand for US produce.

American consumers, however, seem unconcerned by the poor data coming out of late. They bought 3.3% more goods compared to May; an increase of $5.4 billion, which brings total goods imports to $167 billion. Exports of goods at the same time suffered a setback of 2.2% to $105 billion bringing the total deficit in goods trade to $62 billion. Net exports of services amounted to $12.1 billion.

Two weeks ago the Bureau of Economic Analysis (BEA) released their first estimate of second quarter GDP. The quarter-on-quarter growth rate was estimated at 2.4% annualized, but that is looking a bit stretched now. With still roughly two weeks to go before the release of the BEA’s second estimate of 2Q GDP, revisions to inventories and net exports could very well bring the 2Q GDP growth estimate well below 2%.