The trade deficit declined by 7.5% in June, but imports and exports remain well below last year’s level
The numbers: The US trade deficit declined 7.5% in June after a partial recovery in exports, but the flow of cross-border transactions continued to be strained by the global coronavirus pandemic and is still a painful area for the economy.
The trade gap narrowed from $ 54.8 billion in the previous month to $ 50.7 billion in June, the US Census Bureau said Wednesday. This was in line with the forecast of economists surveyed by MarketWatch.
A smaller deficit is normally a good thing because it contributes to the gross domestic product, the official scorecard for the US economy. But both imports and exports are well below last year’s level, reflecting a decline in demand from the US consumer affected by the pandemic and a smaller appetite from other countries for US goods and services.
Last week, the US government said GDP fell by nearly 33% year-on-year in the second quarter, which is the largest decline ever.
Read: Economy suffered a massive dip of 32.9% in the second quarter, indicating a long-term recovery
Also:“A Huge Prosperity Economy” – Federal Aid prevents an even further collapse of GDP
What happened: US exports rose 9.5% in June, partly due to higher shipments of cars and parts and fuel oil.
But even after the increase, exports were almost 16% lower than last year.
Imports increased by 4.7%. The US took in more foreign-made cars, mobile phones and computers, but imports of industrial supplies fell sharply.
Imports were 14.2% below last year’s level.
The goods shortage with China declined slightly to a seasonally adjusted $ 26.7 billion in June.
The gap with China in the first six months of 2020 has narrowed from $ 142.2 billion in the first half of 2019 to $ 142.2 billion, due to ongoing trade tensions with the US and the effects of the virus.
The US imposed a number of tariffs on China before the outbreak, many of which remain in effect. But instead of reducing the overall deficit, the US has replaced Chinese imports with imports from other countries.
Read:Work problems? Wave of relocation after economy reopened to fade in July after viral spiral
The big picture: World trade partially recovered from a semi-collapse during the early stages of the pandemic, but a full recovery is likely to take some time. All major economies of the world have been hampered by the coronavirus, and safeguards to prevent the spread of the disease have also slowed trade flow.
What do they say? “Trade flows have been weak and likely to remain constrained due to a weak global growth background and subdued domestic and international demand,” said Rubeela Farooqi, chief economist of the US high-frequency economy, in a letter to customers.
Market response: The Dow Jones Industrial Average DJIA,
and S&P 500 index SPX,
were opened modestly higher on Wednesday. Shares have been trading in a narrow range in recent weeks.