U.S. Trade Deficit Deepest Since 2008

Unexpectedly, the June U.S. foreign trade deficit deteriorated to $49.9B from a little-revised $42.0B in May. The combination of lower exports and higher imports brought the deficit to its deepest level since September 2008. The deficit exceeded Consensus expectations for a deficit of $42.1B. For the quarter, the deficit deteriorated also to its deepest since 4Q 2008. Trade's estimated 2.8 percentage point subtraction from 2Q real GDP growth thus will be deepened when the figures are revised later this month.

The healthier U.S. economy prompted strength in nonoil imports, as it did in May. The 4.7% m/m increase raised them by more than one-third from last year. During June the gain was led by a 7.8% (26.4% y/y) increase in imports of nonauto consumer goods while auto imports rose 6.6% (81.7% y/y). Capital goods imports rose 1.2% (30.9% y/y) following two months of much stronger gains. Imports of foods, feeds & beverages rose 0.4% (13.6 y/y). Weakness in oil prices caused oil imports to fall 3.3% m/m but values still have risen by one-quarter since last year. Conversely, petroleum import volumes have risen 3.2% y/y. The per barrel cost of crude petroleum slipped to $72.44 (+2.4% y/y). Imports of services jumped another 1.7% (10.4% y/y) as travel imports rose 5.3% y/y. Passenger fares nudged up m/m to bring the y/y gain to 20.1%. Other private services imports including education services, financial services, insurance premiums and losses, telecommunications services and business, professional & technical services rose 10.7% y/y.

Weaker economies abroad caused a 1.3% decline in June exports though the weak value of the dollar helped them rise 17.7% y/y. Capital goods exports fell 3.8% (+17.6% y/y) while food exports dropped 3.9% (-5.5% y/y). Nonauto consumer goods exports nudged up just 0.9% (12.1% y/y) but auto exports jumped 2.5% (67.2% y/y). Services exports were strong again and posted a 0.8% increase (10.1% y/y). The lower value of the dollar encouraged visits to the U.S. and travel exports rose 13.8% y/y while passenger fares rose 17.0%. Exports of other private services rose 8.1% versus 2009.

By country, the trade deficit with mainland China deepened sharply to $26.2B, its deepest since October 2008. Trade with China surged as exports jumped roughly one-quarter y/y and imports rose more than one-third. The trade deficit with Japan deepened to $5.2B, nearly its deepest since December 2008. Imports rose by one-third y/y with U.S. economic recovery and exports rose by one-quarter. With the European Union, the trade deficit deepened to $7.8B, its largest in two years as exports rose 9.1% y/y but imports jumped 21.6%.

The international trade data can be found in Haver's USECON database. Detailed figures are available in the USINT database.