Reporting the July trade report
Well surprise, surprise. Depsite steadily rising oil prices in July -- WTI spot prices averaged $59/barrel, up 4.7% over June and the price of imported petroleum and petroleum products jumped 6.2% in July -- the US trade deficit for July actually shrank.
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total July exports of $106.2 billion and imports of $164.2 billion resulted in a goods and services deficit of $57.9 billion, $1.6 billion less than the $59.5 billion in June, revised. July exports were $0.4 billion more than June exports of $105.8 billion. July imports were $1.1 billion less than June imports of $165.3 billion.A $57.9bn trade deficit puts July in fifth place all-time. While it is some comfort that the US hasn't set a new monthly record since February, so far this year the deficit is running 18% larger than 2004 and 40% larger than 2003.
Fears of a slowing global economy may be coming to fruition. While US exports are up a healthy 11% over last year's pace, the monthly total has been mostly stagnant since April, leveled out around a relatively high $106bn a month. Both goods ($74-75bn) and services ($31bn) are stationary. Certainly 2005Q3 is not going to show the impressive growth of 2005Q2.
While US exports have reached a plateau, US imports have not. June 2005 set a record, and July was just 0.7% lower and came in at #2 all-time. While total exports are up 10.9% this year, imports are up 13.4%. This is clearly not a formula for a shrinking deficit.
The good news -- if one is inclined to see it that way -- is that the big import surge this year is mostly due to oil. The US's imported petroleum bill is up a whopping 36.9% this year. At the same time, non-petroleum goods imports fell to their second lowest monthly total of the year in July, down to "just" $116.6bn.
That being said, on the year non-petroleum goods imports are up 11.0% and total non-petroleum imports are up 10.9% -- the very same rate as total exports. Considering total non-petroleum imports are 37.2% larger than total exports, even an equal growth rate between these two components of US trade is only going to make matters worse.
Less petroleum imports, less total imports. It's the only way. July was a good start on the non-petroleum import front. Let's see if it continues.