US trade deficit falls as imports drop

This April 29, 2014 file photo shows the logo of US giant General Electric in Belfort, France. General Electric on July 18, 2014 reported higher second-quarter earnings.

NEW YORK - The US trade deficit shrank in June primarily on lower imports, according to official data out Wednesday that some analysts said raises questions about American consumer demand.

The nation's trade deficit in goods and services fell in June to US$41.5 billion (S$51.8 billion) from a revised US$44.7 billion in May, the Commerce Department said.

It was the trade deficit's second monthly decline in a row.

June imports of goods and services fell US$2.9 billion, or about 1.2 per cent, from their May level of US$240.3 billion, while June exports edged US$300 million higher to a new record of US$195.9 billion, a gain of 0.2 per cent.

The decline in US imports came mainly in consumer goods, automotive parts, industrial supplies and materials, the report said.

Petroleum imports continued to decline as the US produces more oil and gas at home.

"The narrowing of the trade deficits indicates growth was stronger than expected though the softening in our demand for imported products raises some questions," said a note from economist Joel Naroff.

While the lower trade deficit is welcome, "I would prefer it happening by exports growing a lot faster than imports," he said.

"That would be reflecting strong economic growth around the world."

Patrick Newport, an economist at IHS Global Insight, said the drop in US imports in June was not overly concerning because some categories that had spiked in April and May, such as food, were bound to "correct" at some point.

Overall, "we're seeing an increasing demand" in the US on a three- and four-month basis, he said.

"The economy is getting a little bit better and we're seeing increasing demand."

But Newport said the data again underscores that exports are "not a big positive" for the US economy because of weakness in key trading partners like China, India and the euro zone.

"The countries we export to are not turning in strong numbers," he said.

US trade with Russia declined as tensions build between the two countries over Moscow's involvement in Ukraine.

Exports of US goods to Russia dropped 34.3 per cent to US$820 million, while Russian imports fell 9.2 per cent to US$1.2 billion.

The politically sensitive US trade gap with China rose to US$30.1 billion from US$28.8 billion in May.

The United States has long criticised China for keeping its yuan currency undervalued, making Chinese exports cheaper.