The Bureau of Economic Analysis and the Census Bureau reported that the U.S. trade deficit narrowed in June for the third month in a row. The trade balance improved from -$48.0 billion in May to -$42.9 billion in June. The gain was due to higher goods exports and lower goods imports.
The service sector trade balance edged slightly lower for the month. About 40 percent of the improvement in the trade balance was attributable to lower petroleum costs, thereby reducing the value of our energy imports.
Goods exports increased from $130.9 billion to $132.8 billion, an all-time high. Areas for growth for exports included consumer goods (up $865 million), automotive vehicles and parts (up $695 million), industrial supplies and materials (up $563 million), and non-automotive capital goods (up $168 million) sectors. One are of weakness was exports of foods, feeds and beverages (down $792 million, with the largest decline in soybeans).
Meanwhile, goods imports declined from $193.9 billion to $190.3 billion. The largest decreases were seen in the industrial supplies and materials (down $2.3 billion) and non-automotive capital goods (down $1.3 billion) sectors. Imports were also lower in the consumer goods (down $569 million) and foods, feeds and beverages (down $159 million) sectors. Automotive imports were up $608 million.
Petroleum imports declined from $35.2 billion to $32.9 billion. This compares to petroleum exports of $10.4 billion, a number that was virtually unchanged for the month.
Manufactured goods exports rose from $87.4 billion to $89.4 billion (not seasonally adjusted). Even with slowing global growth, manufacturers continue to benefit from trade, with year-to-date manufactured goods exports of $513.4 billion, or $38.7 billion more than at this point last year.
Of course, this only tells part of the story, as imports have also increased. Through the first six months of 2012, manufactured goods imports were $834.7 billion, or $62.2 billion more than year-to-date figures for 2011.
Geographically, there were higher exports in June in a number of regions around the world. Perhaps surprisingly, given the fact that the Eurozone is in a recession, exports to the European Union were higher, with some exceptions depending on what country. Likewise, exports to Asia were up overall, with weaknesses in both China and Japan. At the same time, exports to Africa and South America were lower for the month, with Brazil being an exception.
Of particular interest in today’s report is the increase in exports this year to both South Korea and Colombia. The free trade agreements we signed with both countries went into effect earlier this year and are already showing dividends. Exports to South Korea were up from $3.4 billion in May to $3.6 billion in June. And year-to-date exports are up from $21.5 billion during the first six months of 2011 to $22.2 billion this year. And exports to Colombia are up from $7 billion last year to $7.6 billion so far this year.
These numbers show us the critical need to continue to negotiate new market opening trade agreements throughout the world. Other nations, particularly the European Union, are negotiating dozens of deals and we are only party to one negotiation, the TPP.
Overall, this report shows that U.S. businesses are having success in finding new markets overseas but we must do more to help them grow exports faster. With exports increasing and imports falling, the trade balance in June is at its lowest point since November 2010. Still, it is hard to not see the impact of slower global growth on these figures, even with gains in manufactured goods exports.
Goods exports in the first six months of 2011 were over 18 percent higher than the first six months of 2010; this compares to year-to-date goods exports in 2012 being just 6.8 percent higher than at the same point in 2011.
Exports remain both an area for growth as well as another indicator showing weaknesses in the global market as exports are not growing as fast as they should be. While the trade deficit has narrowed, manufacturers are still quite anxious about the global economy and their ability to increase new export orders.
Chad Moutray is chief economist, National Association of Manufacturers.