The US trade deficit in goods will decrease by 6% in June as exports pick up again, but the big picture is still ugly
The numbers: The US trade deficit in goods declined by 6.1% in June, as exports grew faster than imports, but the trade level is still far below last year’s level due to the huge burden caused by the corona virus.
The advanced goods trade deficit declined from $ 70.3 billion in June to $ 70.6 billion in June, the US Census Bureau said Wednesday.
The decline was greater than expected. Economists surveyed by MarketWatch had predicted that the gap would narrow only slightly to $ 74.9 billion.
A smaller deficit contributes to gross domestic product, the official scorecard for the US economy. The government is expected to report on Thursday that GDP fell by 35% in the second quarter.
An advanced view of wholesale stocks declined 2% in June. And an early look at store inventory reflected a 2.6% decline.
These declines are likely to offset any GDP benefit of a lower trade deficit.
What happened: US goods exports rose nearly 14% to $ 102.6 billion in June. Higher car exports accounted for most of the increase.
Most exports increased, indicating a solid recovery for US manufacturers. The only category that showed a decline was food and feed.
Imports rose by 4.8%. More cars and consumer goods, such as mobile phones and electronics, produced abroad made their way through US ports, but a sharp decline in industrial imports partly offset these increases. The US likely imported less foreign oil because Americans drive and fly less.
The advanced report contains only goods. Services like travel and tourism are only included in the full report to be released next week.
The big picture: World trade collapsed early in the onset of the coronavirus pandemic and the level of overall activity is still low despite a recent recovery. US exports are 24% lower than a year ago, while imports decreased by 17%.
Trade is unlikely to return to pre-crisis levels for some time, contributing to the slow recovery of the US economy. Millions of people around the world have lost their jobs or suffered a significant drop in income, limiting demand for a range of goods and services.
What do they say ?: “Trading activity changed in June, but still lagged the rest of the economy,” James Watson and Gregory Daco of Oxford Economics wrote in a letter to customers. “With global and US demand heading a long and risky path to recovery, trade is becoming one of the hardest hit sectors.”
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.