The U.S. trade deficit widened 0.2% in July to $42.0 billion, just marginally above the 18-month low set June, the Commerce Department said Tuesday.
The July trade deficit was well below the consensus forecast of Wall Street economists. Analysts had expected the sharp decline in the deficit in June to be partially reversed with the deficit widening to a projected $43.5 billion.
The July gap came in slightly above the revised deficit of $41.9 billion for June, originally estimated at $42.9 billion.
The trade gap had averaged $49.2 billion in the first five months of the year.
Both exports and imports fell in July, with exports dropping at a slightly faster pace. Both sectors, economists said, are suffering from sluggish global and domestic demand — a trend that’s likely to continue.
Economists said net exports should be neutral for U.S. gross domestic product for the third quarter but cautioned that this is only the first of three reports.
“In short, the report suggests that exports are starting to weaken, although the statistical impact on GDP will probably be neutralized by relatively weak imports as well,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics, in an email to clients.
Stock futures were higher as investors focused on the Federal Reserve policy meeting set for Wednesday and Thursday.
Exports, imports fall
Exports fell 1.0% to $183.3 billion in July, led by a drop in exports of industrial supplies. Exports have made little gains in the past four months. Offsetting the decline, exports of civilian aircraft jumped in July, and exports of agriculture products set a record in the month.
Imports fell 0.8% to $225.3 billion. The lion’s share of the improvement was due to a smaller bill for crude-oil imports. Imports of autos, parts and engines hit a record.
The U.S. trade deficit with China widened to a record $29.4 billion in July compared with $27.0 billion in the same month last year. Imports from China hit a record $37.9 billion.
There were also signs the European debt crisis was negatively impacting U.S. trade. The nation’s deficit with the European Union in July was the highest since October 2007 as U.S. exports to the region slowed compared with the same month last year while EU exports flowed into the U.S. at a faster pace. U.S. exports to Germany in July were the lowest since February 2010, the government said.
The petroleum deficit narrowed 7% in November to $20.9 billion. This is the lowest level since November 2010.
The value of U.S. crude imports fell to $25.8 billion in July from $26.4 billion in June as the price of a barrel of oil fell to $93.83 from $100.13 in the previous month. But oil prices have since rebounded, analysts noted.