The U.S. trade deficit narrowed modestly in June, though the improvement fell just short of economists’ expectations as both imports and exports declined.
Why it matters: A shrinking trade deficit can signal slower economic activity, which, if sustained, could strengthen the case for lower interest rates.
- The U.S. Census Bureau and the Bureau of Economic Analysis reported that the goods and services trade deficit narrowed to $73.3 billion in June, down $4.4 billion from a revised May reading.
- The improvement was slightly smaller than economists had expected, with forecasts calling for the deficit to fall to $73.0 billion. Even with the decline, June marked the second-largest monthly trade deficit of the year.
Breaking it down: Trade activity slowed on both sides of the ledger. Exports fell $2.9 billion to $314.7 billion, while imports dropped by a larger $7.3 billion to $388.0 billion.
- The larger decline in imports accounted for most of the improvement in the overall trade balance.
Impact on Mortgage Rates: June’s narrower trade deficit points to slightly softer economic activity, but the change was modest. On its own, the report is unlikely to move mortgage rates significantly, though a sustained slowdown in trade could add to the case for the Federal Reserve to lower interest rates if broader economic growth continues to cool.