Highlights
The U.S. trade deficit in June expanded moderately but largely due to higher oil prices and a larger oil deficit. But there is good news in the detail for U.S. manufacturers. The overall U.S. trade gap widened to $27.0 billion from a revised $26.0 billion deficit the previous month. The June shortfall was less than the market forecast for a $28.5 billion deficit. Exports advanced 2.0 percent while imports rebounded 2.3 percent.

The widening in the trade shortfall was due to a wider petroleum deficit which expanded to $17.2 billion from $13.3 billion in May. In contrast, the goods excluding petroleum gap shrank significantly to $20.0 billion from $22.6 billion in May.

Behind the boost in the petroleum gap were both higher oil prices and more barrels imported. Crude oil prices jumped to $59.17 per barrel from $51.21 the month before. The number of barrels that was imported in June rebounded 7.1 percent.

So which producers in the U.S. were happiest about the latest trade numbers? By end-use categories, the June advance in exports was led by industrial supplies (up $1.2 billion) and by capital goods ex autos (up $0.4 billion). Also posting gains were foods, feeds & beverages exports. Automotive was in the positive category but essentially was flat. Consumer goods exports edged down marginally.

Outside of oil, the import numbers show weak domestic demand. Imports were almost entirely boosted by the industrial supplies category which jumped $3.9 billion and includes oil imports. The foods, feeds & beverages component and automotive imports rose incrementally. Businesses are not adding to stockroom shelves-at least not from imports. Consumer goods imports dropped a sizeable $1.7 billion and capital goods imports were down but basically flat.

Year-on-year, overall exports slipped to minus 22.2 percent from minus 21.2 percent in May while imports were little changed in June at down 31.1 percent from minus 31.2 percent the previous month.

Today's report is good news for manufacturers of exports in the U.S. as exports have been boosted by a weaker dollar. However, businesses apparently are still concerned about domestic demand as they have cut back on nonoil imports. Markets had little initial reaction to today's trade data.

Market Consensus Before Announcement
The U.S. international trade gap in May unexpectedly narrowed on both a rebound in exports and a drop in imports. The overall U.S. trade gap shrank to $26.0 billion from a revised $28.8 billion shortfall the previous month. The May differential was the smallest since the $25.7 billion for November 1999. For the latest month, exports rebounded 1.6 percent while imports declined another 0.6 percent. Looking ahead, a weaker dollar in recent weeks points to a rise in export and possibly a dip in nonoil imports. However, oil prices rose during the month and likely will overwhelm any improvement in exports and nonoil imports. Markets should pay attention to exports for impact on U.S. manufacturing but the overall deficit for impact on the dollar.

2009 Release Schedule

Released On: 1/13 2/11 3/13 4/9 5/12 6/10 7/10 8/12 9/10 10/9 11/13 12/10 Released For: Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct