US goods trade deficit contracts, still expected to subtract from Q2 GDP growth
SPY•Trade seen as a Q2 GDP drag
With businesses ramping up investment in artificial intelligence, last month's drop in imports is probably temporary. The AI build-out is heavily dependent on imports. The government on Monday reported a strong increase in orders and shipments for non-defense capital goods in June.
"Our model mapping the trade data onto the national accounts now points to net trade subtracting around one percentage point from second-quarter GDP growth," said Oliver Allen, senior U.S. economist at Pantheon Macroeconomics.
The government is scheduled to publish its advance estimate of second-quarter gross domestic product growth on Thursday. A Reuters survey of economists estimates the economy grew at a 2.1% annualized rate last quarter, which would match the first quarter's pace.
Trade has subtracted from GDP for two straight quarters. Some of the anticipated drag from trade could be offset by robust business investment in equipment and an expected pickup in consumer spending. Inventories, which have been drawn down for four straight quarters, remain a wild card.
