The U.S. trade balance in July edged up but much less than expected-largely on a downward revision to June and a July narrowing in the petroleum deficit. But it is not looking good for manufacturers as exports declined. But consumer demand may be holding up in the U.S. The trade deficit widened slightly to $42.0 billion from $41.9 billion in June (originally $42.9 billion). Analysts forecast a deficit of $44.3 billion. Exports declined 1.0 percent, following a 1.2 percent boost in June. Imports shrank 0.8 percent after a 1.5 percent fall in June.
The increase in the trade gap was led by the non-petroleum goods gap which expanded to $35.8 billion from $34.2 billion in June. The petroleum deficit decreased to $20.9billion in July from $22.5 billion the month before. The services surplus eased to $15.3 billion from $15.5 billion in June.
On a not seasonally adjusted basis, the July figures showed surpluses, in billions of dollars, with Australia $2.1 ($1.9 for June), Hong Kong $1.8 ($2.6), and Singapore $0.7 ($1.2), among others. Deficits were seen, in billions of dollars, with China $29.4 ($27.4), European Union $12.0 ($8.4), OPEC $8.4 ($8.5), Japan $6.8 ($6.0), Mexico $5.0 ($5.9), Germany $4.9 ($4.1), Ireland $2.6 ($2.6), and Canada $2.1, among others.
The decline in exports was led by a $2.4 billion drop in industrial supplies which included a $1.0 billion decrease in exports of nonmonetary gold. This gold subcomponent has been very volatile in recent months and likely represents international financial transactions. Also decreasing were automotive exports (down $0.6 billion) and consumer goods (down $0.4 billion). Food, feeds & beverages gained $1.8 billion and capital goods advanced $0.1 billion, led by civilian aircraft (up $1.4 billion).
Import detail was mixed. Industrial supplies fell $2.1 billion with $1.4 billion of this attributed to crude oil falling. Businesses are being cautious about equipment investment as capital goods excluding autos dipped $0.6 billion. But businesses may be a little optimistic about consumer demand. Auto imports gained $0.5 billion while consumer goods rose $0.4 billion.
Overall, manufacturers are dealing with recession in Europe and slower growth in Asia. But the U.S. economy increasingly is being supported by the consumer. And it is almost certain that the deficit will widen the next report on higher oil prices.
Market Consensus before announcement
The U.S. international trade gap in June shrank, again thanks in part to lower oil prices but also from a general import dip. The trade deficit decreased to $42.9 billion from $48.0 billion in May. Exports advanced 0.9 percent, following a 0.3 percent rise in May. Imports shrank 1.5 percent after a 0.8 percent decrease in May. Surprisingly, the narrowing in the trade gap was led by the non-petroleum goods gap which shrank to $34.4 billion from $37.5 billion in May. The petroleum deficit also decreased-to $22.5 billion in June from $24.8 billion the prior month. The services surplus slipped to $14.6 billion from $14.9 billion.