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 9/11/07 For Jul 2007 | ||||||||||||
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Highlights
The nation's trade gap narrowed slightly in July to $59.2 billion from a revised $59.4 billion in June, previously reported as a deficit of $58.1 billion. July&'s figure was right in line with the market forecast for a $59.5 billion shortfall. The improvement reflects relatively stronger growth in exports as imports also rose. Export strength was in capital goods and autos while import strength was in autos and industrial supplies (including oil).
The merchandise trade gap (Census basis) shrank to $65.8 billion from a revised $66.6 billion deficit in June. The goods gap excluding petroleum narrowed more than the overall balance, coming in at $41.8 billion in July, compared to $43.1 billion in June.
On the import side, overall merchandise imports rose $2.8 billion in July. Gains were seen in automotive, up $1.1 billion; industrial supplies, up $1.0 billion; consumer goods excluding autos up $0.4 billion; and foods, feeds & beverages up $0.2 billion. Capital goods excluding autos edged down marginally while "other" was flat.
On the export side, merchandise exports grew by $3.6 billion in July. Gains were seen in capital goods excluding autos, up $1.9 billion; autos, up $1.4 billion; consumer goods excluding autos, up $0.5 billion; and foods, feeds & beverages, up $0.3 billion.
The oil trade deficit widened in July to $24.0 billion from $23.5 billion in June. Crude oil prices in July jumped to $65.56 per barrel from $60.95 per barrel in June.
On a bilateral basis, the goods deficit with Canada decreased from $5.9 billion in June to $5.7 billion in July. The goods deficit with Canada decreased from $5.9 billion in June to $5.7 billion in July. The goods deficit with the European Union increased from $9.2 billion in June to $13.0 billion in July. Country balances are not seasonally adjusted.
Today's numbers show that export demand continues on a healthy upward trend and provides support for U.S. manufacturing. However, we may be seeing some moderation in business investment in equipment in the U.S. with the softening of capital equipment imports but that is a volatile component. Given that the overall number came in line with the consensus, there should be little market reaction. However, the dollar continues to weaken due to other factors - including expectations of a coming Fed ease and likely tightening by central banks overseas.
The U.S. international trade gap fell back in June to a lower-than-expected $58.1 billion from $59.2 billion in May. The improvement reflects higher exports, a reflection of strong global demand, and slowing imports, a reflection of slowing domestic demand including a decline in imports of consumer goods excluding autos. We are likely to see a continuation of the upward trend in exports, given the strength in overseas economies. But U.S. retailers are still trying to figure out the strength of the consumer sector and there are lags between changes in businesses' views on demand and when the imports arrive. On a technical note, exports of capital equipment dipped in June and that component is likely to rebound in July.
International trade balance Consensus Forecast for July 07: -$59.5 billion
Range: -$61.5 billion to -$57.7 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. |
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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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