The Trade Gap Narrows Sharply In June - August 9, 2012
The nation's trade gap, the differential between the aggregate dollar amount of the total exports out of this country and the imported goods and services headed over here, narrowed materially in June, the latest month for which such data are available. Specifically, the U.S. Commerce Department reported that exports totaled $185.0 billion in June and imports came in at $227.9 billion, producing a negative trade imbalance of $42.9 billion. That was down from a downwardly revised May trade gap of $48.0 billion. Initially, the May trade figure had been reported as a deficit of $48.7 billion.
In all, June exports rose by $1.7 billion from the month before, while imports fell by $3.5 billion. Lower average oil prices during the month of June accounted for much of the lesser import figure. The trade gap affects the rate of GDP change in this country, with exports contributing to overall economic growth, while imports detract from GDP. Accordingly, the second-quarter rate of business growth is likely to get a lift, perhaps boosting growth beyond the initially reported 1.5%. Revised GDP data are due out later this month.
Moreover, the goods and services deficit decreased by $7.4 billion from June of 2011 to June of this year. Exports were up by $12.3 billion during this period, while imports were up by $4.9 billion.
Broken down, the May-to-June increase in exports reflected higher levels of consumer goods, automotive vehicles, parts, and engines, and industrial supplies. The reduction in imports reflected lesser amounts of industrial supplies and capital goods flowing into our country.
Taken as a whole, this was an excellent report, at least on a comparative basis, although in absolute terms the imbalance is still very large and, therefore, troubling--especially the major gap with China. That nation, which houses the world's second largest economy, is seeing its economic output slow materially, with data out today suggesting that this emerging economic powerhouse could suffer a harder landing than many have been expecting.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.