Q2 Trade Dragged on Growth

• The U.S. goods and services trade deficit narrowed in June.
• A smaller goods deficit offset a smaller services surplus; total exports also increased more than total imports.
• PNC expects U.S. exports to pick up with major central banks easing monetary policy.

The U.S. goods and services trade deficit narrowed 2.5% in June to $73.1 billion from $75.0 billion in May (revised slightly downward from $75.1 billion). The trade deficit rose 9% in April and 1% in May. June’s total trade deficit was higher than the consensus expectation of $72.5 billion. The total trade deficit has been widening from $60 billion in August 2023, but remains well below the record $102 billion deficit in March 2022. The trade deficit increased in the second quarter, and trade was a drag on real GDP growth. On a year-ago basis the June trade deficit was up 13%. 

A smaller goods deficit offset a smaller services surplus, resulting in a narrower total trade deficit on the month. The goods deficit fell 2.5% in June to $97.4 billion, and the services surplus fell 2.4% to $24.2 billion. Total exports (up 1.4%) also increased more than total imports (up less than 1%) in June. There was a broad-based increase in goods exports, while goods imports fell in most categories except for capital goods (up 3%) and consumer goods (up 4%). Services exports fell in June with services imports up slightly; inbound travel to the U.S. (a services export) fell 2%. Outbound travel from the U.S. (an import) increased 1% in June. 

Economic conditions for international trades will be more favorable with the start of global monetary easing cycle, despite weakness in the near term while aggregate supply and demand balance out. PNC expects lower interest rates in many advanced economies and gradual economic recoveries abroad will continue to support U.S. exports over the next year. A weakening U.S. dollar will further support foreign purchases of U.S. goods and services over the next year. 

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.