U.S. Trade Gap Narrows, but Markets Continue to Watch Its Impact on Q2 GDP

VG Markets · 2026-07-29T02:33:23Z
U.S. Trade Gap Narrows, but Markets Continue to Watch Its Impact on Q2 GDP

The U.S. goods trade deficit narrowed 4.2% to $101.5 billion in June. According to data reported by Reuters, the improvement was stronger than market expectations, although economists generally expect trade to remain a headwind for second-quarter economic growth.

The GDP picture

  1. Pantheon Macroeconomics estimates net trade could subtract about 1 percentage point from second-quarter GDP.
  2. Reuters' consensus forecasts Thursday's advance GDP estimate at an annualized 2.1%, matching the first quarter's pace.
  3. Goods imports fell by $8.2 billion to $306.2 billion, although they remained 16.6% higher than a year earlier. Exports declined to a five-month low of $204.7 billion, partly reflecting weaker industrial supplies shipments amid lower oil prices.

Other factors to watch

  1. Orders for non-defense capital goods increased notably in June, suggesting business investment remained resilient and may help offset part of the impact from weaker net trade.
  2. Wholesale inventories rose 0.3%, matching May's increase, while retail inventories excluding autos declined 0.2%, leaving their contribution to GDP subject to upcoming official estimates.

Consumer confidence eases

The Conference Board's consumer confidence index fell to 90.8 in July from 92.2, below the consensus estimate of 92.3, reflecting weaker labor-market sentiment and continued uncertainty surrounding developments in the Middle East.

The share of respondents saying jobs were plentiful fell to its lowest level since February 2021, while the labor-market differential narrowed to 3.1 from 3.8.

Housing market

FHFA data showed single-family home prices rose 2.2% year over year in May. Meanwhile, the average 30-year fixed mortgage rate reached 6.58%, around 60 basis points higher than in late February, during a period that also saw heightened geopolitical tensions.

For Southeast Asian market participants

Thursday's advance GDP release will be closely watched by markets. A reading below consensus could reinforce expectations that trade weighed on second-quarter growth, while a stronger-than-expected result may suggest domestic investment remained resilient despite external trade headwinds. The data may also influence market expectations for the U.S. dollar and interest-rate outlook.

Sources: Reuters, U.S. Commerce Department, Conference Board, Federal Housing Finance Agency, Freddie Mac.