U.S. economic growth in the second quarter could surprise on the downside after data on Thursday showed a widening in the goods deficit in June and a moderate pace of inventory accumulation.
The Census Bureau’s new advanced economic indicators report showed the advance goods deficit rising 3.7 percent to $63.3 billion last month as imports outpaced export growth. Wholesale inventories were unchanged, while stocks at retailers increased 0.5 percent.
Following the advance goods trade and inventories data, the Atlanta Federal Reserve lowered its second-quarter gross domestic product estimate to a 1.8 percent annualized rate from a previous 2.3 percent pace.
The government will publish its first GDP growth estimate for the second quarter on Friday.
“The inventory correction looks severe in the second quarter, likely subtracting over a full percentage point from GDP growth,” said Daniel Silver, an economist at JPMorgan in New York. “While this is a big negative for second-quarter GDP, inventory dynamics should be a positive for growth going forward.”
The Atlanta Fed estimates trade will subtract 0.10 percentage point from second-quarter GDP growth.
“The increase in both import and export activity paints a more constructive picture on both the U.S. recovery and the global economic backdrop,” said Millan Mulraine, deputy chief economist at TD Securities in New York.
“From a GDP accounting perspective, however, trade is likely to be a drag on economic activity in the second quarter. The handoff to the next quarter will be unfavorable, and when combined with the stronger dollar and weakening global activity we expect the deficit to widen further in the coming months.”
The advance goods and inventory data came on the heels of a weak durable goods report on Wednesday, which had prompted economists to lower their second-quarter GDP growth estimate by at least one-tenth of a percentage point.