U.S. trade deficit widens in July

Trade deficit in the U.S. widened in the month of July, reversing the main factors that led to a surprise narrowing in the deficit in the second quarter. The U.S. trade balance for July widened to USD 50.1 billion from a revised USD 45.7 billion recorded in June, mirroring the advance goods trade data received last week. The entire widening in the trade balance was driven by the non-petroleum balance, and goods trade, in particular. The petroleum balance remained the same at –USD 11.9 billion in July, while non-petroleum balance widened by USD 4 billion to –USD 45.5 billion.

The real goods deficit widened to USD 82 billion. Total exports dropped 1 percent on the month, reversing June’s 0.7 percent fall. Softness in exports was mainly widespread, with declines in food and beverage, capital goods, and consumer goods countering gains in automotive and industrial supplies. The large fall in exports of food and beverage possibly reflects the reversal of soybean exports last month, which were interpreted as front-running of tariffs by China on U.S. soybean exports, noted Barclays in a research report. On the contrary, imports rose 0.9 percent in the month. Only consumer goods imports dropped in the month; all other major categories saw increases.

Overall, the narrowing of the deficit in the second quarter seems transitory and larger fiscal deficits are expected to coincide with larger trade deficits, stated Barclays.

“Today’s report pushed our Q3 GDP tracker higher by a tenth, to 2.9 percent q/q saar”, added Barclays.

At 13:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was bullish at 83.1175. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex