Drop in Overseas Demand Leads to Wider Trade Gap
Weaker demand from overseas resulted in a wider U.S. trade gap in June, the government said Friday, a development that underscored the economy’s weakness in the second quarter.
The U.S. deficit in trade of goods and services increased to $29.41 billion in June from a revised $28.47 billion in May, the Commerce Department said. Exports and imports both fell to levels not seen since early 2000, indicating weakness at home and abroad.
“Weakness in many foreign economies has dampened the worldwide demand for U.S. exports,” said Kathleen Cooper, Commerce undersecretary for economic affairs.
Separately, a report compiled by the University of Michigan showed an improvement in consumer outlook, according to market sources.
The trade data are a major part of the equation for calculating economic growth. Although second-quarter growth had originally been pegged at an annual rate of about 0.7%, many analysts now believe it could be flat or possibly negative when an updated estimate is released Aug. 29.
Although the trade gap came in very close to analysts’ and the Commerce Department’s initial projections, revisions to other reports are seen dragging lower overall second-quarter growth.
According to the trade report, exports fell more sharply than imports, dipping to $85.95 billion. Imports of goods and services also fell, dropping for a third straight month to $115.36 billion. Both levels were the lowest since February 2000.
The slowing was concentrated in capital goods, expensive manufactured items and equipment that businesses buy to boost output and productivity.
Sales of capital goods abroad, at $27.06 billion, were at their lowest level since November 1999. American manufacturers have pinned their exporting difficulties in large part on the continued strength of the U.S. dollar in foreign-exchange markets.
Imports of capital goods also fell in June, dropping to $24.35 billion from $24.63 billion. That was the lowest level since May 1999, the Commerce Department said.
“The downturn in capital goods spending has affected countries around the world, and this is reflected in the numbers,” said Lynn Reaser, chief economist with Banc of America Capital Management Group in St. Louis.
Even if second-quarter growth ends up with a negative sign in front of it, some economists do not think it will matter much. “It doesn’t change what [actually] happened,” said David Orr, chief economist with First Union Capital Markets in Charlotte, N.C.
Recent data on consumer spending, housing and the factory sector have shown stability or even growth, pointing to better times ahead.
The United States’ politically sensitive deficit with Japan widened by 3.8% in June to $5 billion. The U.S. deficit with China grew by 7.6% to $6.6 billion. The deficit with Mexico widened to a record $3.1 billion.
The University of Michigan’s preliminary gauge of consumer sentiment rose to 93.5 from 92.4 in July, market sources said Friday. The gauge was boosted by consumers’ sunnier assessments of their situations, which economists linked to the arrival of tax refund checks and lower gas prices.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
U.S. Trade Deficit
The overall gap continues to reflect a deficit in the trade of goods and services. In billions of dollars:
June: --$29.4 billion
Source: Commerce Department
More to Read
Inside the business of entertainment
The Wide Shot brings you news, analysis and insights on everything from streaming wars to production — and what it all means for the future.
You may occasionally receive promotional content from the Los Angeles Times.