US trade deficit narrows in July on decline in imports

The monthly trade deficit narrowed to $41.9bn in July, between forecast ($40.5bn) and consensus expectations ($42.2bn). At the same time, the June deficit was revised wider to $45.2bn from the prior estimate of $43.8bn. Broadly in line with last week's advance report on international trade in goods, exports (0.4% m/m, previous: -0.1%) rose modestly in July as imports fell (-1.1% m/m, previous: 1.1%). Export growth was led by food and beverages, as well as automotive exports.

The decline in imports was driven by food and beverages, as well as nonautomotive consumer goods. The real goods deficit narrowed to $56.2bn in July from $59.0bn in June, driven by a narrowing in the real nonpetroleum goods deficit ($52.6bn, previous: $56.0bn). This was partially offset by a wider real petroleum deficit ($9.3bn, previous: 8.7bn). Within energy imports, barrels of crude petroleum import rose 5.9% m/m, to 7.6mn barrels/day.

"The revisions to the prior month's trade data within Q2 largely offset each other, leaving our Q2 GDP tracking estimate unchanged after rounding at 3.7%. While the nominal trade deficit in July was reported modestly wider than our forecast, imports fell a bit more than expected after adjusting for price effects. This resulted in a slightly narrower estimate of the Q3 real trade deficit and boosted our Q3 GDP tracking estimate one-tenth, to 2.4%",says Barclays.