The trade deficit expanded sharply in July as US imports jumped 4.7% ― much more than analysts were anticipating. Exports grew too; the 2.2% monthly gain marks the third straight advance, suggesting stabilization abroad.
“While a wider trade gap means a larger net export subtraction from GDP growth, we interpret this as evidence of a rebound in overall economic activity—both in the US and abroad,” said Joseph LaVorgna, chief US economist at Deutsche Bank.
The trade deficit was $32.0 billion in July, compared with a downwardly revised $27.5 billion shortfall in June. Analysts were looking for a figure of just $28.0 billion, but the advance in imports provides some hope that American consumers are beginning to spend again.
The gain wasn’t just a result of oil prices either, as in previous months. Imports of non-petroleum goods rose 6.1% in July, including a $2.4 billion gain in autos and a $1.7 billion climb in consumer goods.
“Imports of auto parts was of particular intrigue, as it accelerated 21.5% in the month that the cash-for-clunkers program kicked off,” said BMO analyst Jennifer Lee, who called the growing deficit “actually good” because it signifies strength on both fronts.
“Excluding autos, consumer goods imports increased 5%, the first gain since April and the largest since March 2006,” she noted.
Total exports moved up to $127.6 billion in July, a $2.4 billion increase from June. Responsible for the advance were export gains in automative vehicles & parts (+$1.3 billion), capital goods (+$0.7 billion), industrial supplies & materials (+$0.4 billion), and consumer goods (+$0.4 billion).
Total imports surged ahead to $152.4 billion, up $7.2 billion compared to June. US demand came in the form of automotive vehicles & parts (+$2.4 billion), consumer goods (+$1.7 billion), industrial supplies & materials (+$1.4 billion), and capital goods (+$1.3 billion).
Compared to July 2008, the monthly deficit is rather tame. Exports have fallen 22.4% (or $36.8 billion) compared to 12 months before, and imports are down by 30.4% (or $69.8 billion). The deficit with China expanded by $2 billion in this report, but compared to last year it remains $20 billion lower.
Looking ahead, LaVorgna said to watch out for data next week, as reports on August retail sales, July business inventories, and August industrial production “will provide important information on the mix (and strength) of growth in the current quarter.”