The US trade deficit narrowed unexpectedly in June by 4.1 per cent to $56.8bn, as exports grew more than twice as fast as imports in spite of surging oil prices.
Economists said the data would lead to an upward revision of US economic growth in the second quarter, from the 1.9 per cent annualised rate which was reported last month.
Supported by the weakness of the dollar, US exports jumped in June by 4 per cent – the most since February 2004 – to a record level of $164.4bn (€110.2bn, £86.4bn). Meanwhile, imports rose by 1.8 per cent to $221.2bn – also a record – driven entirely by a surge in purchases of foreign oil. Demand for other international goods and services declined by 1.4 per cent in a sign of retrenching US consumer spending.
Economists had on average expected the trade deficit to widen to $61.5bn from a $59.2bn gap in May and were generally comforted by the news. “Trade continues to be a large and crucial support for US growth,” said Nigel Gault, chief US economist at Global Insight.
While encouraging, the strong trade data may not be sufficient to reverse growing expectations that the US economy may take longer than expected to recover from its slump.
“The trade data are among the highest-quality data points but also the least timely,” said Steven Wieting, an economist at Citigroup. “Increasingly robust readings on second quarter data do not leave us more optimistic looking forward.”
In addition, there are fears that with growth slowing among the US’s largest trading partners around the world, the export boom it is currently enjoying could start to dwindle in the coming months.
Some early signs of this came with the Institute for Supply Management’s most recent surveys of activity in the manufacturing and services sectors, which both showed declines in indices of new export orders.
“Unfortunately, with foreign economies slowing and the dollar no longer depreciating, it’s now likely that export growth will indeed slow,” said Abiel Reinhart, an economist at JPMorgan. “Over the next year we expect that net exports will contribute 0.5 percentage points to growth, down from 1.8 percentage points over the last year.”
The trade deficit in goods with China widened from $20bn in May to $20.4bn in June, while larger gaps were also recorded in trade with the European Union, Canada and Japan. However, the deficit with Mexico narrowed and surpluses with Hong Kong and Singapore grew, the data showed.