The Bureau of Economic Analysis and the Census Bureau said that the U.S. trade deficit widened from $34.54 billion in June to $39.15 billion in July. The June figure had been the lowest trade deficit since September 2009, but the higher deficit was in-line with consensus estimates. Even with the larger deficit in July, the trend so far this year has been for modest improvements in the overall balance. The year-to-date average trade balance (January to July) was $39.94 billion compared to average of $46.40 billion and $44.55 billion, respectively, in 2011 and 2012.
Higher goods imports were largely behind the widening of the trade deficit, up from $187.87 billion in June to $191.29 billion in July. In contrast, goods exports declined somewhat from $133.81 billion to $182.71 billion. This largely suggests strength in the U.S. relative to our largest trading partners, with import growth outpacing exports. Petroleum was not much of a factor in the change in the deficit, with the petroleum trade deficit up marginally from $10.27 billion to $10.43 billion. The service sector trade balance was lower but essentially unchanged, down from $19.51 billion to $14.44 billion.
Growth in goods exports in July stemmed mostly from industrial supplies and materials (up $1.69 billion) and foods, feeds and beverages (up $402 million). These were offset, though, by weaknesses in exports for non-automotive capital goods (down $1.61 billion), consumer goods (down $1.36 billion), and automotive vehicles, parts and engines (down $179 million).
On the import side, the largest gains were in the industrial supplies and materials (up $1.99 billion), automotive vehicles, parts and engines (up $807 million), and consumer goods (up $710 million). Non-automotive capital goods items were the only major area with declining imports, down $276 million.
The bottom line is that the data continue to show sluggish growth for manufactured goods exports, even the trade balance better this year than in the last two. In the first seven months of 2013, manufactured goods exports equaled $685.03 billion (not seasonally adjusted), or 1.6 percent higher than the $674.27 billion observed in the same time period last year. This indicates that manufacturers continue to struggle to grow their overseas sales, even as we have seen some recent stabilization in both Europe and China. Moreover, it reminds us that growth in manufactured goods exports this year remain well below the pace of the past couple years, making it harder to achieve the President’s goal of doubling exports by 2015.
Europe remains one of the weaker regions for export growth. Using non-seasonally adjusted data, year-to-date exports to the European Union have fallen from $157.86 billion to $150.98 billion. The good news is that we have seen modest gains in many of our largest trading partners, including increases in Canada (up from $170.98 billion to $174.02 billion), Mexico (up from $123.65 billion to $130.30 billion), and China (up from $61.38 billion to $63.82 billion). Other regional data were mixed, with exports to the Pacific Rim countries lower year-to-date (down from $218.21 billion to $216.21 billion) while export to South America were higher (up from $103.12 billion to $106.10 billion).
Chad Moutray is the chief economist, National Association of Manufacturers.
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