By Eric Morath and Jonathan House

WASHINGTON--Imports into the U.S. posted the sharpest decline in a year in June, helping to narrow the trade deficit but possibly signaling an easing of domestic consumer demand.

The U.S trade deficit shrank 7% to a seasonally adjusted $41.54 billion in June from May, the Commerce Department said Wednesday. Imports fell 1.2% to $237.40 billion, the lowest level since February. Meanwhile, exports increased 0.1% to $195.86 billion, the highest level on record.

Economists surveyed by The Wall Street Journal had projected a June trade deficit of $44.6 billion. The May deficit was revised to $44.66 billion from $44.39 billion.

The deficit has narrowed about 6% since March.

A narrowing trade deficit generally supports economic growth. But whether the latest figures will reshape the view of the economy in the second quarter largely depends on how they compare to estimates the Commerce Department used to calculate gross domestic product in the second quarter.

Last week, the department said GDP expanded at 4.0% annual pace from April through June, with trade detracting a net 0.61 percentage point from growth. The first revision to those figures is due out later this month.

The June decline in imports was led by decreased demand for consumer goods, automobiles and parts, and foreign oil. The decline could be pay back for a run up in imports earlier in the year. May non-petroleum imports were the highest on record.

Petroleum imports continued to decline, down 3.3% in June to the lowest level since November 2010. Demand for foreign oil has subsided as U.S. production ramped up.

An uptick in exports this spring was awelcome sign for the U.S. economy. Exports rose sharply in May and held those gains in June. The pace of goods and service sold overseas had slowed late last year and earlier in 2014.

The small June increase was led by increased shipments of food, cars and other consumer goods.

The numbers coincide with improved growth in China this spring and a stabilizing European economy. However, unrest in the Middle East, Africa and Ukraine could all pose headwinds to global trade.

Through the first half of the year, the trade gap for goods with China has widened 4.9% compared to a year earlier. That's only slightly larger than the 4% overall growth in the good-trade deficit. The goods deficit with Canada, the largest U.S. trading partner, has widened 8.6% in the first half of this year compared to same period last year and the deficit with the European Union expanded 15.2% in the first half. The gap with Mexico, Japan and Brazil narrowed in thefirst half when compared to the first half in 2013.

The Commerce Department report on trade can be found at http://www.census.gov/ft900.

Write to Eric Morath at eric.morath@wsj.com and Jonathan House at jonathan.house@wsj.com.

(END) Dow Jones Newswires

August 06, 2014 08:45 ET (12:45 GMT)

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