U.S. trade deficit narrows in June on rise in exports, data likely to be better in August

The U.S. trade deficit narrowed to USD 50.7 billion in June from May’s USD 54.8 billion, as imports dropped more than exports. Exports rose 9.4 percent, as compared with May’s decline of 4.3 percent. On the other hand, imports grew 4.7 percent, as compared with May’s fall of 0.7 percent. The growth in exports was recorded throughout all product categories, except food and beverages, which recorded a fall of 5 percent. Automotive vehicles saw some of the largest rises, recording a rise of 144 percent. Accounting for price effects, real goods exports rose 12 percent in June.

Delving into imports data, the picture appears mixed. Automotive imports mainly drove the rise in total imports, rising 108 percent. Only a couple sectors recorded negative growth. For instance, industrial supplies and other goods both shrank 19 percent and 2 percent, respectively. Excluding price effects, real imports rose just 4 percent in June.

Services trade continued to fall, although at a slower rate. Exports of services fell 4 percent for the month, while imports shrank 5 percent.

“Since the U.S. and its trading partners (barring a few exceptions) continued to ease lockdowns throughout most of July, we expect to see better data next month. However, the improvement is likely to be moderated by pockets of new cases emerging throughout the world. This will likely keep demand subdued and prevent businesses from operating at full capacity. As a result, trade statistics will improve slowly, tentatively and unevenly”, said TD Economics in a research report.