WASHINGTON – The US trade deficit widened in June as the strong dollar encouraged imports and weighed on exports amid weaker growth in the global economy, official data released yesterday showed, AFP reports. The trade gap ballooned 7.1 percent from May to $43.8 billion, the Commerce Department reported, well above the average analyst forecast of $42.7 billion.
The May shortfall was not as large as previously thought; the department revised the deficit to $40.9 billion from $41.9 billion. “The revised trade data for May show a smaller monthly deficit, implying that net trade likely added a bit more to GDP growth in Q2 than was initially estimated,” said Barclays analyst Jesse Hurwitz.
In its first estimate last week of second-quarter GDP, the Commerce Department said growth rose at an annual rate of 2.3 percent, picking up from a tepid 0.6 percent expansion in the first quarter. In June, US exports edged down 0.1 percent to $188.6 billion. The decline mainly reflected weaker exports of capital goods and industrial supplies that were partly offset by an increase in consumer goods.
Imports jumped 1.2 percent to $232.4 billion, led by surges in consumer goods and industrial supplies. Automobile imports hit a record $29.8 billion as the US auto market enjoys robust growth. Imports of food and drink products also reached a record, at $11.1 billion, the department said. For the first time since November, the US trade deficit on petroleum products climbed.
The Federal Reserve recently remarked on the strong dollar’s pressure on US exports. That combines with slowing growth overseas, notably major trading partners China and the European Union. The politically sensitive goods trade gap with China continued to rise, to $31.5 billion in June from $30.5 in May. Washington has long accused the Chinese government of keeping its yuan currency undervalued to gain an unfair cost advantage for Chinese exports.
The trade gap with the 28-nation European Union widened more than 15 percent to $14.5 billion on the back of record imports. “This is not a good report for GDP,” said Robert Brusca, chief economist at FAO Economics. “The US apparently has lost competitiveness — even the oil sector where the US had displayed an advantage recently. Petroleum imports show a sharp pick-up over three months.”