The U.S. trade deficit narrowed by much more than expected in the month of July, the Commerce Department revealed in a report on Friday, with the smaller deficit reflecting an increase in the value of exports and a decrease in the value of imports.
The Commerce Department said the trade deficit narrowed to $39.5 billion in July from a revised $44.7 billion in June.
Economists had expected the deficit to narrow to $41.3 billion from the $44.5 billion originally reported for the previous month.
The narrower than expected deficit was partly due to a jump in the value of exports, which surged up by 1.9 percent to $186.3 billion in July from $182.9 billion in June.
Exports of foods, feeds, and beverages jumped to a record high due largely to a substantial increase in exports of soybeans.
On the other hand, the report said the value of imports fell by 0.8 percent to $225.8 billion in July from $227.6 billion in June.
The pullback reflected notable decreases in imports of pharmaceutical preparations, civilian aircraft, and cell phones and other household goods.
Paul Ashworth, Chief U.S. Economist at Capital Economics, said the narrower trade deficit is good news for third quarter GDP growth.
"Assuming both export and imports increased by 0.2% m/m over the remaining two months of this quarter, then exports would increase by roughly 10% annualized over the quarter as a whole, with imports up by around 1%," Ashworth said.
He added, "In short, net external demand would make a big positive contribution to GDP growth, adding to the evidence that the latter will be 3% annualized or higher."
The Commerce Department noted that the goods deficit narrowed to $60.3 billion in July from $65.6 billion in June, while the services surplus edged down to $20.9 billion from $21.0 billion.
by RTT Staff Writer
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