The international trade balance measures the difference between imports and exports of both tangible goods and services. Imports may act as a drag on domestic growth and they may also increase competitive pressures on domestic producers. Exports boost domestic production. Why Investors Care
| Released on 8/12/08 For Jun 2008 | ||||||||||||
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Highlights
The U.S. trade deficit in June unexpectedly shrank in June despite a jump in the oil deficit. Weaker consumer and business demand appears to be the reason the deficit narrowed. The overall U.S. trade gap fell to $56.8 billion from a revised $59.2 billion deficit in May and came in much better than the market forecast for a $61.5 billion deficit. In June, exports jumped 4.0 percent while imports rose 1.8 percent. The oil gap jumped to $36.4 billion in June from $32.8 billion in May, while the nonoil goods deficit fell to $32.2 billion from $38.0 billion in May. The nonoil deficit improvement was due to a drop in both capital goods and consumer goods imports, indicating that both sectors are expecting a slowing in demand. Strength in exports was widespread but led by capital goods.
Once again, the average price of imported oil set another record high, reaching $117.13 per barrel in June, up from $106.21 per barrel in May. But the high prices are cutting into demand for oil. June's number of barrels nudged back up a monthly 1.2 percent but was down 7.5 percent from year-ago levels.
Year-on-year, overall exports were up 21.1 percent in June while imports were up 13.5 percent.
Today's report shows exports continuing to support U.S. economic growth while consumers and businesses are adjusting to weaker economic growth in part by easing back on import growth. After this morning's release the dollar firmed somewhat. The impact on equities is uncertain given the mixed signals of healthy export growth and softer domestic demand. On a final note, the drop in the June trade deficit points toward an upward revision to second quarter GDP - although June inventories numbers still have yet to weigh in and could have a different impact.
The U.S. international trade gap in May surprisingly narrowed despite a huge run up in oil prices as exports outpaced imports. The overall U.S. trade gap narrowed to $59.8 billion from $60.5 billion deficit in April. In May, exports continued upward with a healthy 0.9 percent gain while imports rose a moderate 0.3 percent. The oil gap actually shrank to $33.2 billion in May from $34.8 billion in the prior month, while the nonoil deficit widened to $38.0 billion from $35.8 billion in April. Not surprisingly, the average price of imported oil set another record high, reaching $106.21 per barrel in May from $96.81 per barrel in April. Looking ahead to June, we are likely to see another gain in exports and slowing in non-oil imports. Whether the overall gap worsens or improves will heavily depend on whether the physical volume (barrels) of oil imports dips and offsets at least one more monthly increase in the price of imported oil.
International trade balance Consensus Forecast for June 08: -$61.5 billion
Range: -$65.7 billion to -$59.0 billion
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Exports grow when foreign economies are strong. The weaker the foreign exchange value of the dollar, the less expensive goods and services are to foreigners, and this also helps spurt export activity. Imports grow when U.S. economic growth is robust. Imports are also spurred by a strong foreign exchange value of the dollar. |
![[Chart]](chart_1.gif)
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The international trade balance has posted a deficit almost continuously since the 1980s. Any trade deficit is a drag on U.S. GDP growth, but a smaller deficit adds to growth, while a larger deficit decreases GDP growth. |
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