US trade deficit narrows as exports hit 10-month high

FORT LAUDERDALE, FL - JUNE 24: Shipping containers are offloaded from a cargo ship at Port Everglades on June 24, 2016 in Fort Lauderdale, Florida. The fallout from the exit of Britain from the European Union, or 'Brexit', has the potential to upset global trade which includes exports and imports from the United States. Joe Raedle/Getty Images/AFP == FOR NEWSPAPERS, INTERNET, TELCOS & TELEVISION USE ONLY ==

WASHINGTON: The US trade deficit fell more than expected in July as exports rose to their highest level in 10 months, offering further evidence that economic growth picked up early in the third quarter.

The Commerce Department said on Friday the trade gap narrowed 11.6% to US$39.5bil (RM161.0bil), declining after three straight months of increases. June’s trade deficit was revised slightly up to US$44.7bil (RM182.2bil).

Economists polled by Reuters had forecast the trade gap decreasing to US$42.7bil (RM174.4bil) in July after a previously reported US$44.5bil (RM181.8bil) shortfall. 

When adjusted for inflation, the deficit dropped to US$58.3bil (RM237.9bil) from US$64.5bil (RM263.2bil) in June.

The trade report added to upbeat reports on consumer spending, industrial production and residential construction that have suggested the economy has regained momentum after output increased 1.0% in the first half.

Despite July’s increase, exports continue to be hobbled by the residual effects of the dollar’s surge against the currencies of the United States’ main trading partners between June 2014 and December.

Export growth could come under pressure. International Monetary Fund (IMF) managing director Christine Lagarde told Reuters this week the IMF would likely downgrade its 2016 global growth forecast because of weak demand, flagging trade and investment.

Exports of goods and services rose 1.9% in July to US$186.3bil (RM760.5bil), the highest since September 2015. Exports to the European Union dropped 9.5%, with goods shipped to the United Kingdom falling 9.2%.

Exports to China increased 3.8%.

Imports of goods and services slipped 0.8% to US$225.8bil (RM921.7bil) in July. Oil prices averaged US$41.02 per barrel in July, the highest level since September 2015.

It was the fifth consecutive month that oil prices increased.

Imports from China rose 2.4%. The politically sensitive US-China trade deficit increased 1.9% to US$30.3bil (RM123.7bil) in July. - Reuters