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 9/11/08 For Jul 2008 | ||||||||||||
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Highlights
The U.S. trade deficit in July widened sharply on a surge in oil imports but otherwise actually improved. The overall U.S. trade gap jumped to $62.2 billion from a revised $58.82 billion deficit in June and came in worse than the market forecast for a $58.0 billion deficit. In July, exports advanced 3.3 percent while imports increased 3.9 percent. The overall worsening was due to a spike in oil prices as the oil gap gushed to $43.4 billion in July from $37.3 billion in June. Meanwhile the nonoil goods deficit narrowed to $29.6 billion from $32.5 billion in June. The nonoil deficit shrinkage was due to a decline in both capital goods and consumer goods imports, reflecting a slowing in the U.S. economy. Strength in exports was led by industrial supplies and automotive.
The average price of imported oil set another record high, coming in at $124.66 per barrel in July, up from $117.13 per barrel in June. Spot prices peaked in early July and we are likely to see some easing in the monthly average for August.
Year-on-year, overall exports were up 20.1 percent in July while imports were up 16.8 percent.
Today's report shows the likely final impact of the recent surge in oil prices along with a slowing in the economy. Once the numbers are put in real terms (inflation adjusted), the July data actually show improvement in the trade gap and may be one of the few reports supporting third quarter growth. But the slowing in imports indicates that businesses recognize that the economy is very sluggish.
The U.S. international trade gap unexpectedly shrank in June despite a jump in the oil deficit. The narrowing was due to both a jump in exports and weaker consumer and business demand in the U.S. The overall U.S. trade gap fell to $56.8 billion from a $59.2 billion deficit in May. In June, exports jumped 4.0 percent while imports rose only 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. Looking ahead, we may see some modest bounce back in non-oil imports as they were unusually weak in June but given continued sluggishness in the economy, import growth outside of oil is still likely soft. Oil prices were still rising into early July and we are likely to some further rise in the monthly average price for oil imports. However, a decline in physical quantities of oil imported may restrain any expansion of the oil deficit. It is likely too early for a stronger dollar and slower growth abroad to have impacted export growth in July - but look for softness in coming months.
International trade balance Consensus Forecast for July 08: -$58.0 billion
Range: -$61.0 billion to -$56.0 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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