The US goods trade deficit widened in June as imports continued to grow thanks to strong economic activity, indicating that trade likely remained a drag on growth in the second quarter.
The US economy recovered from the pandemic more quickly than that of other large countries, thanks to massive fiscal stimulus, lower interest rates, and COVID-19 vaccines.
However, bottlenecks in the supply chain have hampered manufacturers’ ability to increase production, attracting more imports.
“The widening of the nominal goods deficit in June is further evidence that net exports will be a drag on second-quarter GDP,” said Ryan Sweet, chief economist at Moody’s Analytics.
The Commerce Department reported Wednesday that the goods trade deficit rose 3.5% to $91.2 billion. Imports of goods grew 1.5% to $236.7 billion, with purchases of food, industrial supplies and capital goods increasing.
Spending during the pandemic has shifted to goods from services, with Americans locked in their homes. Now that nearly half of the US population has been vaccinated against the coronavirus, demand for services is recovering.
Some economists believe that fewer goods will be imported in the coming months and the trade gap will narrow, but the delta variant of the virus is causing new infections across the country, which could limit demand for services.
“We expect the overall trade deficit to narrow in the coming months as consumers shift their spending towards services and the spread of the vaccine abroad encourages further export growth,” said Maher Rashid, an economist at Oxford Economics.
“However, the risks of supply chain disruptions and the rapid spread of the delta variable can slow trade flows,” he added.
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Exports go up
Exports of goods rose 0.3% to $145.5 billion, with shipments of foodstuffs dropping sharply, and exports of capital goods also declining. However, the United States shipped more cars and consumer goods.
The report was released ahead of Thursday’s second-quarter GDP data. Trade has been a burden GDP growth for three consecutive quarters.
According to a Reuters poll of economists, the economy likely grew at a solid 8.5% annual rate in the most recent quarter, an acceleration from 6.4% in the January-March period.
The Commerce Department reported that wholesaler inventories rose 0.8% last month, after rising 1.3% in May.
Retail inventories grew 0.3% after declining 0.8% in May. Retail stocks, excluding autos, which go into the GDP calculation, rose 0.6% after rising 0.9% in May.
“Overall, it appears that real inventories fell sharply in the second quarter on a net basis, but the weakness was more severe at the beginning of the quarter,” said Daniel Silver, an economist at JPMorgan in New York.