US trade deficit widens to $50.1b in July as imports rebound

WASHINGTON (REUTERS) - The United States trade deficit widened slightly more than expected in July as exports dipped, but a rebound in imports pointed to some firming in underlying demand early in the third quarter.

The Commerce Department said on Wednesday the trade gap increased 13.3 per cent to US$39.1 billion (S$50.1 billion). June's shortfall on the trade balance was revised to US$34.5 billion from the previously reported US$34.2 billion. Economists polled by Reuters had expected the trade deficit to rise to US$38.7 billion in July.

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

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

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

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

Imports of goods and services rose 1.6 per cent to US$228.6 billion. Imports of autos, parts and engines were the highest on record in July. Exports of goods and services dipped 0.6 per cent to US$189.4 billion in July. However, exports of petroleum products hit a record high.

Weak overseas demand, especially in Europe, has caused an ebb in export growth after trade helped to lift the US economy out of the 2007-2009 recession. In July, exports to the 27-nation European Union fell 7.4 per cent, resulting in a record trade deficit. Exports to the EU in the first seven months of the year were down 4.4 per cent compared to the same period in 2012.

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

Imports from China jumped 8.3 per cent in July, lifting the contentious US trade deficit with China to a record US$30.1 billion.