U.S. Trade Deficit Widens in July


The U.S. trade deficit widened slightly more than expected in July as exports dipped, but a rebound in imports pointed to some firming in underlying domestic demand early in the third quarter.

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The Commerce Department said on Wednesday the trade gap increased 13.3 percent to $39.1 billion. June's shortfall on the trade balance was revised to $34.5 billion from the previously reported $34.2 billion.

Economists polled by Reuters had expected the trade deficit to widen to $38.7 billion in July.

When adjusted for inflation, the trade gap expanded to $47.7 billion from $43.8 billion in June. This measure goes into the calculation of gross domestic product.

Trade's contribution to GDP growth in the second quarter was neutral, but economists expect it to add to growth this quarter and the rise in the so-called real trade deficit is probably not enough to change that view.

The economy grew at a 2.5 percent annual rate in the April-June quarter, stepping up from the first-quarter's 1.1 percent pace.

"We expect some narrowing in the trade deficit in the third quarter. It's consistent with some pickup in the global demand," said Yelena Shulyatyeva, an economist at BNP Paribas in New York.

The three-month moving average of the trade deficit, which irons out month-to- month volatility, decreased to $39.1 billion in the three months to July from $39.3 billion in the prior period.

The increase in imports in July, which reflected rises in industrial supplies, automobiles and consumer goods, suggested some strengthening in domestic demand.

Imports of goods and services rose 1.6 percent to $228.6 billion. Imports of autos, parts and engines were the highest on record in July.

Exports of goods and services dipped 0.6 percent to $189.4 billion in July. However, exports of petroleum products hit a record high.

U.S. financial markets showed little reaction to the trade data, with attention focused on the debate in the United States over whether to take action in war-torn Syria.

Weak overseas demand, especially in Europe, has caused an ebb in export growth after trade helped to lift the U.S. economy out of the 2007-09 recession. But there are signs the global economy is picking up and U.S. manufacturers have also been reporting an increase in export orders.

The Institute for Supply Management said on Tuesday its gauge of new export orders rebounded in August after slipping in July.

In July, exports to the 27-nation European Union fell 7.4 percent resulting in a record trade deficit. Exports to the EU in the first seven months of the year were down 4.4 percent compared to the same period in 2012.

Exports to China fell 4.9 percent. China has been one of the fastest-growing markets for U.S. goods, but growth there has slowed in recent months and exports to that country were up just 4.0 percent for the first seven months of 2013.

Imports from China jumped 8.3 percent in July, lifting the contentious U.S. trade deficit with China to a record $30.1 billion.