- The U.S. trade deficit decreased to $50.7 billion in June from $54.8 billion in May, as imports fell more than exports.
- U.S. trade has turned a corner. Exports grew by 9.4% (from -4.3% in May) while imports rose by 4.7% (down 0.7% in May). The growth in exports was seen across all product categories, except food and beverages which saw a 5% decrease (following a 3% decrease in May). Automotive vehicles (144%) saw some of the largest increases. Accounting for price effects, real goods exports increased by 12% in June.
- Digging deeper into imports data gives a mixed picture. Automotive imports were responsible for most of the increase in total imports, increasing by 108% (-33% in May). Only a couple of sectors saw negative growth. For example, industrial supplies and other goods both contracted by 19% and 2% respectively. Excluding price effects, real imports increased by only 4% in June.
- Services trade continued to decline, albeit at a slower pace. Exports of services dropped 4% (10% in May) for the month, while imports contracted by 5% (12% in May).
Key Implications
- June trade data provides a much better picture compared to the dismal data of recent months. Exports and imports of goods expanded month-on-month. In fact, almost all sectors registered positive growth, reflecting the continued relaxation of domestic – barring a few states – and global lockdowns. Still, exports of food and beverages (-5%) and imports of industrial supplies (-19%) continue to disappoint. In fact, June exports of food and beverages ($9.9 billion) were the lowest since April 2016 ($9.7 billion).
- While the monthly growth of trade in goods is positive news, trade in services – the pandemic’s biggest victim – continued to contract. Overall, exports and imports of goods and services still remain below the levels seen last year, down 24% and 20% from June 2019, respectively. There is still a long way to go before trade reaches pre-pandemic levels.
- Since the U.S. and its trading partners (barring a few exceptions) continued to ease lockdowns throughout most of July, we expect to see better data next month. However, the improvement is likely to be moderated by pockets of new cases emerging throughout the world. This will likely keep demand subdued and prevent businesses from operating at full capacity. As a result, trade statistics will improve slowly, tentatively and unevenly.
