Surge In Imports Results In Wider U.S. Trade Deficit In July

With the value of imports increasing at a much faster pace than the value of exports, the Commerce Department released a report on Thursday showing that the U.S. trade deficit widened by much more than expected in July.

The report showed that the trade deficit widened to $32.0 billion in July from a revised $27.5 billion in June. Economists had been expecting the deficit to widen to $27.3 billion from the $27.0 billion originally reported for the previous month.

A jump in the value of imports contributed to the wider deficit, with the value of imports increasing by 4.7 percent to $159.6 billion in July from $152.4 billion in June.

The increase in the value of imports outpaced the increase in the value of exports, which rose by 2.2 percent to $127.6 billion in July from $124.9 billion in June.

While the surge in imports points to an increase in U.S. domestic demand, the increase could limit the strength of third quarter gross domestic product growth, as imports are subtracted when
calculating GDP.

“Net trade is unlikely to support U.S. real GDP growth in the current quarter to the same extent as in the second quarter,” said Christoph Balz, an analyst for Commerzbank. “Indeed, the July data alone would suggest that it could subtract from growth.”

Balz added, “A turnaround in private investment and inventory rebuilding, however, should lift growth markedly in the third quarter.”

While the increase in the value of imports was partly due to an increase in crude oil prices, the deficit still widened by almost $4 billion excluding petroleum products.

The report also showed that the goods deficit widened to $42.7 billion in July from $38.3 billion in June, while the services surplus narrowed to $10.7 billion in July from $10.8 billion in the previous month.

Additionally, the Commerce Department noted that the trade deficit with China widened to $20.4 billion in July from $18.4 billion in the previous month. The trade deficit with the European Union also jumped to $8.0 billion in July from $4.5 billion in June.