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US sees smaller growth in July’s trade deficit
THE US trade deficit rose less than expected in July as both exports and imports fell, suggesting that trade could contribute to economic growth in the third quarter.
The Commerce Department said yesterday the trade gap rose 0.3 percent to US$43.7 billion. June’s trade deficit was revised down slightly to US$43.5 billion from the previously reported US$43.6 billion.
Economists polled by Reuters had forecast the trade shortfall widening to US$44.6 billion in July. When adjusted for inflation, the trade deficit increased to US$61.6 billion from US$60.8 billion in June. The so-called real goods deficit in July was below the second-quarter average of US$62.4 billion.
While that suggests trade could add to gross product in the third quarter, economists at Wrightson ICAP cautioned that Hurricane Harvey could sharply impact commodity prices and trade volumes, and push up the trade deficit in September.
The US-China trade deficit rose to an 11-month high in July. That ongoing deficit has grabbed the attention of President Donald Trump, who has blamed it for helping to decimate US factory jobs as well as stunting US economic growth.
Trump, who argues that the US has been disadvantaged in its dealings with trade partners, has ordered the renegotiation of the North American Free Trade Agreement, which was signed in 1994 by the US, Canada and Mexico.
On Saturday, Trump threatened to withdraw from a free trade deal with South Korea.
Prices of US Treasuries were little changed by the data yesterday. US stock index futures were trading higher while the dollar was weaker against a basket of currencies.
The US government said last month that trade contributed two-tenths of a percentage point to the economy’s 3.0 percent annualized growth pace in the second quarter.
In July, real goods exports slipped despite petroleum exports hitting a record high.
Exports of goods and services fell 0.3 percent to US$194.4 billion in July. Exports of motor vehicles and parts fell by US$0.6 billion, but exports of capital goods rose by US$0.9 billion.
In the all-important goods sector, the US deficit was the smallest since December at US$65 billion.
But exports of passenger cars fell by US$1 billion while mobile telephones and similar household goods fell US$500 million for the month.
Exports to China rose 3.5 percent, while those to the European Union fell 9.8 percent.
Imports of goods and services slipped 0.2 percent to US$238.1 billion in July. Imports of motor vehicles and parts fell by US$0.8 billion and crude oil shipments dropped by US$1 billion.
Imports of goods from China gained 3.1 percent. The US-China trade deficit rose percent to US$33.6 billion in July, the highest level since August 2016.
The US saw a 3.7 percent drop in goods and services imported from the EU in July. The trade deficit with the EU rose 7.9 percent to an eight-month high of US$13.5 billion.
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