U.S. GDP likely to get boost from smaller trade gap

Tue Aug 6, 2013 5:47pm EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Lucia Mutikani

WASHINGTON (Reuters) - The U.S. economy likely grew faster than initially reported in the second quarter, thanks to a sharp narrowing in the trade deficit to its lowest in more than 3-1/2 years in June as exports touched a record high and imports fell.

The Commerce Department said on Tuesday the trade gap fell 22.4 percent to $34.2 billion, the smallest since October 2009. The percentage decline was the largest since February 2009. The shortfall on the trade balance was $44.1 billion in May.

When adjusted for inflation, the gap narrowed 17 percent to $43.2 billion, the smallest since January 2010. The deficit in June was far smaller than the government had estimated in its advance gross domestic product report last week.

Economists, who had expected the trade gap to narrow only to $43.5 billion in June, said second-quarter GDP growth could be revised up to as high as an annual pace of 2.5 percent from the 1.7 percent rate initially estimated by the government.

"Today's surprise implies a significant upward revision to second-quarter GDP," said Laura Rosner, an economist at BNP Paribas in New York. "Our calculations suggest an implied revision of roughly plus 0.8 percentage point and our tracking estimate of second-quarter GDP growth is now 2.5 percent."

Economists had on Friday raised their growth estimates for the April-June period by a tenth of percentage point after data on factory orders showed a slightly higher pace of inventory accumulation in June than the government had assumed in its advance GDP growth estimate.

If economists' assumptions are correct, the faster pace of economic growth could bring the Federal Reserve closer to scaling back its massive monetary stimulus program.

Economists expect an announcement on the future of the Fed's monthly bond purchases in September.   Continued...

 
A general view of the Port of Los Angeles, California November 29, 2012. REUTERS/Lori Shepler