The Bureau of Economic Analysis and the Census Bureau reported that the U.S. trade deficit was $42.0 billion in July, or mostly unchanged from the $41.9 billion in June. With that said, both goods exports and goods imports fell for the month, essentially offsetting one another. Goods exports decreased from $132.8 billion to $130.8 billion; while, goods imports dropped from $190.2 billion to $188.1 billion. The service trade balance edged wider by $271 million mainly on increased imports.
Looking specifically at goods exports, there were increases in the foods, feeds, and beverages (up $1.8 billion) and non-automotive capital goods (up $113 million) industries. These were more than offset by decreases in industrial supplies and materials (down $2.4 billion), motor vehicles and parts (down $627 million), and consumer goods (down $430 million) sectors.
In contrast to these figures, the largest declines in goods imports came in the industrial supplies (down $2.1 billion) and non-automotive capital goods (down $553 million) sectors. There were higher imports observed in the automotive (up $496 million), consumer goods (up $432 million), and foods, feeds, and beverages (up $115 million) industries.
The petroleum trade balance has narrowed significantly this year, down from a $30 billion deficit in January to $20.9 billion in July. This decrease has stemmed almost entirely from a drop in imports. Part of this narrowing could be explained by lower costs, but slowing economic growth is also most likely a factor. Petroleum exports and imports both declined in July, down from $10.4 billion to $9.8 billion and from $32.9 billion to $30.8 billion, respectively.
Manufactured goods exports declined significantly from $89.4 billion to $80.9 billion (not seasonally adjusted). Clearly, slowing global growth and uncertainties about the future of the economy are taking a toll. Even with this month’s decline, year-to-date manufactured goods exports were $594.3 billion, still $40.4 billion more than at this point in 2011.
These declines were seen across-the-board among all of our major trading partners, except for China and Mexico, which were unchanged. Exports to Europe, the Pacific Rim, and South America were all lower. Given recent data showing contracting manufacturing activity worldwide, this is perhaps not a surprise.
Overall, this report provides mixed news on the trade front. On the positive side, the trade balance was unchanged from last month, in contrast to expectations that it might widen. In addition, we continue to see declining petroleum imports this year, helping to improve the total picture. Yet, these figures also reflect a softening in the global economy, with manufactured goods exports dropping in July.
As such, this data is one more indicator that overall economic activity is weak – a significant challenge for the manufacturing sector as it seeks to boost sales and production moving into the new year. It also shows that we still have a lot of work to do in order to grow exports. A good step would be for Congress to act on passing Russia PNTR legislation to help open access to the growing Russian market to U.S. manufactured goods.
Chad Moutray is chief economist, National Association of Manufacturers.