International Trade: Shifting To A Positive

Bottom Line:   The US trade deficit declined slightly for the third month in June as exports rose and imports fell slightly. The goods trade deficit improved sharply in the final months of the 2nd Quarter as consumer demand slowed and domestic inventories of consumer goods rose sharply (several major US retailers reported swelling inventories). Motor vehicle imports were also sharply lower. Overall, the medium-term trend, which was towards sharply wider deficits, has shifted towards modest improvement with supply chains operating much more efficiently and US consumer demand slowing. Expect net trade to be a modest positive for GDP in the coming quarters after dragging on growth for nearly two years.