- The U.S. trade deficit increased to $63.6 billion in July from $53.5 billion in June, as exports fell more than imports.
- Exports grew by 8.1% (from 9.6% in June) while imports rose by 10.9% (from 4.6% in June). The growth in exports was seen across all product categories. Automotive vehicles (46%) and consumer goods (21%) saw some of the largest increases. Accounting for price effects, real goods exports increased by 11% in July.
- Imports also grew across the board. Automotive imports were responsible for most of the increase in total imports, increasing by 42% (down from 108% in June). Both industrial supplies and Other goods – which saw negative growth in June – increased by 12% and 19%, respectively. Excluding price effects, real imports increased by only 12% in July.
- Services trade continued to grow, albeit at a slower pace. Exports of services increased 0.7% (1% in June) for the month, while imports increased by 3.4% (1.4% in June).
Key Implications
- Both exports and imports continue to improve. In fact, all sectors registered positive growth, reflecting the continued relaxation of domestic – barring a few states – and global lockdowns. Overall, exports and imports of goods and services still remain below the levels seen last year, down 20% and 11% from July 2019, respectively. There is still a long way to go before trade reaches pre-pandemic levels.
- July trade data shows that U.S. exports have gone past their “pent-up” stage. Meanwhile, imports have surged, reflecting increased economic activity domestically and relaxed lockdowns worldwide.
- Since the U.S. and its trading partners (barring a few exceptions) continued to ease lockdowns throughout most of August, we expect to see better data next month. However, the improvement is likely to be moderated by pockets of new cases emerging in the U.S. and other parts of the world. This will likely keep demand subdued (especially in the services sector) and prevent businesses from operating at full capacity. As a result, trade statistics are likely to improve in a tentative and uneven manner.
