The goods and services U.S. trade deficit fell by 11.60 percent on month in July, largely due to a fall in the non-oil goods gap (by 8.65 percent) that was even greater than the decline in the oil shortfall (6.39 percent). In June, a big overall trade deficit increase resulted mainly from the first widening of the oil trade gap since December.
America’s chronic manufacturing trade deficit in July ($74.83 billion) was its second largest of all time. Overall U.S. exports rose to their highest level ($186.33 billion) since September, while combined goods and services imports dropped for the first time since March. The huge U.S. goods deficit with China increased to its highest level ($30.33 billion) since November. The drag on U.S. growth from the cumulative increase of the trade deficit during the current economic recovery remained at nearly 20 percent, or more than $437 billion in constant dollars.
Here are selected highlights of the latest monthly (July) trade balance figures released this morning by the Census Bureau:
>The U.S. goods and services trade deficit dropped by 11.60 percent in July, from an upwardly revised $44.60 billion to $39.74 billion, mainly because the non-oil trade deficit improved much more than the oil trade deficit.
> America’s non-oil trade deficit shrank sequentially by 8.65 percent in July, from $58.90 billion to $53.79 billion. The oil trade gap narrowed, too, but only by 6.39 percent – from $5.32 billion to $4.98 billion.
>The July trade deficit pattern contrasted sharply with that of June, when an 84.19 percent surge in the oil deficit keyed an 8.68 percent monthly worsening of the total trade deficit, while the non-oil goods deficit rose by only 1.46 percent. The June numbers, in turn, broke sharply with the recent U.S. Pattern of the combined goods and services deficit and the non-oil goods deficit rising strongly while the oil shortfall plummeted.
>The total goods deficit shrank in July from a downwardly revised $65.63 billion to $60.34 billion, an 8.06 percent decrease that was the greatest since March’s 12.02 percent.
>Despite the improved non-oil goods performance, however, the longstanding and enormous U.S. manufacturing trade deficit hit its second highest total ever in July – $74.83 billion. Only last October’s $76.74 billion was higher. The June manufacturing deficit was 1.05 percent lower, at $74.05 billion.
>Partly as a result, the manufacturing-dominated U.S. goods trade deficit with China rose by 1.90 percent on month in July to reach $30.33 billion – its highest level since November ($31.29 billion). The June China merchandise deficit, $29.76 billion, was 1.93 percent lower.
>Total U.S. goods and services exports rose 1.86 percent sequentially in July, from a downwardly revised $182.92 billion to $186.33 billion – their highest total since September ($187.55 billion). The increase was the biggest since March, 2014 (2.15 percent).
>Most of this improvement took place in goods trade, where exports in July also increased to a post-September high ($124.05 billion) from June’s upwardly revised $120.61 billion. In addition, the 2.85 percent monthly improvement was the biggest for goods since March, 2014 as well (2.88 percent).
>July’s combined goods and services imports declined by 0.78 percent, to $225.80 billion from June’s downwardly revised $227.58 billion.
>Again, most of the improvement came on the goods side, where imports fell by 0.99 percent, from a downwardly revised $186.24 billion to $184.39 billion.
>The services surplus fell, however, in July, from $20.98 billion to $20.87 billion. Services exports fell and services imports rose.
>The July manufacturing trade deficit increased because exports fell faster on month (by 7.32 percent) than the much larger amount of imports (3.57 percent).
>So far this year, the manufacturing trade deficit is running 2.34 percent ahead of last year’s record $831 billion total. Exports are down 7.52 percent, and the much larger amount of imports is off last year’s January-July total by only 3.40 percent.
>U.S. merchandise exports to China increased by 3.79 percent sequentially in July, while the much greater amount of imports rose by 2.36 percent.
>The U.S. goods deficit with China is running 6.12 percent behind last year’s record total of $367.17 billion.
>In trade with other countries that have made recent headlines, the U.S. merchandise deficit with Korea, whose 2012 trade agreement with the United States is the model for President Obama’s politically unpopular Trans-Pacific Partnership (TPP) deal, fell by 5.29 percent on month in July. Both U.S. merchandise exports and imports declined.
>But the Korea deficit is running 9.30 percent ahead of last year’s January-July total, and on a monthly basis has quadrupled since the bilateral agreement went into effect with the United States in March, 2012.
>U.S.-Mexico trade tells a similar story. The U.S. merchandise deficit fell by 11.74 percent on month in July, on falling U.S. exports and imports. But this deficit, too, is running ahead of last year’s levels – by 8.88 percent.
>Volatile American trade in high tech goods saw its longstanding shortfall decrease by 8.28 percent sequentially in July, from a June level of $7.38 billion that was the year’s highest to $6.77 billion. Exports and imports were down on this front, too.
>Year-to-date, however, this shortfall is down 11.74 percent.
>The combined U.S. goods and services deficit is running behind 2015 levels, too – but by only 0.17 percent. Given that American economic growth is running at about one percent annualized in inflation-adjusted terms – less than half last year’s rate – the trade deficit’s persistence is one sign that it keeps dragging on the current recovery.
>Indeed, as of the second quarter of this year, which ended in June, the increase in the real non-oil goods deficit had sliced cumulative growth during this sluggish expansion by 19.70 percent – or $437.19 billion in constant dollars.