U.S. trade deficit narrows as petroleum imports fall

narrowed more than expected in June as petroleum imports dropped

to a 3-1/2 year low, suggesting that trade was less of a drag on

second-quarter economic growth than initially thought.

The Commerce Department said on Wednesday the trade gap

dropped 7.0 percent to $41.5 billion, the lowest reading since

January. May's trade deficit was revised up to $44.7 billion.

Economists polled by Reuters had expected the deficit to

widen slightly to $44.7 billion in June from a previously

reported $44.4 billion shortfall in May.

When adjusted for inflation, the deficit narrowed to $48.8

billion from $52.0 billion in May.

June's overall trade deficit was far smaller than what the

government had assumed in its first snapshot of second-quarter

gross domestic product published last week. That suggests the

GDP growth estimate for the quarter could be revised up.

Trade subtracted 0.61 percentage point from growth in the

April-June period. The economy expanded at a 4.0 percent annual

rate during that quarter after shrinking 2.1 percent in the

first three months of the year.

In June, imports fell 1.2 percent, the largest drop in a

year, to $237.4 billion. That came as petroleum imports declined

to $27.4 billion, the lowest level since November 2010, from

$28.3 billion in May.

A domestic energy boom has seen the country reduce its

dependence of foreign oil, helping to ease pressure on the

current account deficit. In June, the petroleum deficit fell to

is lowest level since May 2009.

While non-petroleum imports fell to $167.6 billion from

$169.6 billion in May, food imports hit a record high.

In June, exports edged up 0.1 percent to a record high of

$195.9 billion. Exports were supported by a surge in

automobiles, parts and engines, which rose to a record high.

Exports of consumer goods were also the highest on record.

Rising exports bode well for economic growth prospects for

the rest of the year. Exports to Canada hit an all-time high in

June. Exports to China rose 1.4 percent, while imports from that

country increased 3.7 percent.

That left the politically sensitive trade gap with China at

$30.1 billion, up 4.5 percent from May.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)