Economic Forecasts

Demand for U.S. Goods Narrows Trade Deficit

Kiplinger's latest forecast on the direction of the trade deficit

Kiplinger's Economic Outlooks are written by the staff of our weekly Kiplinger Letter and are unavailable elsewhere. Click here for a free issue of The Kiplinger Letter or for more information.

If you already subscribe to the print edition of the Letter, click here to add e-mail delivery and the digital edition at no extra cost.

The trade deficit narrowed a bit in July on the back of rising demand for U.S. goods and weaker domestic demand for imports, falling to a seasonally adjusted $70.1 billion, from a revised $73.2 billion in June — a decline of 6.7%. Still, the trade deficit will likely remain wide as the consumer-driven recovery in the United States runs ahead of the global economic rebound.

Rising demand abroad helped with U.S. goods exports in July. They rose 1.3%, with every major category advancing. Capital-goods exports rose 2.2% after two consecutive months of declines. Auto exports surged 5.3%, while consumer-goods exports rose a solid 4.5%. Imports grew more slowly in July, partly because of ongoing bottlenecks in global supply chains and shipping. Total imports fell only 0.2%, thanks to strength in services imports. Goods imports slid 1.2% during the month. Every major category saw a decline in imports in July, with the sole exception being auto imports. Consumer-goods imports fell 3.4%, reflecting the slowdown in consumption growth in recent months, as the effects of the earlier fiscal boost faded.

Services trade continues to improve, with both imports and exports posting gains in July. But again, imports heavily outpaced exports, 5.5% to just 0.1%. Both imports and exports of services remain constrained by travel disruptions. Imports of travel services also picked up quite strongly, in contrast to the slight fall in exports in this category. Consumers shifting from buying stuff to once again spending on experiences was reflected in the 22.6% jump in travel-services imports. The stricter entry restrictions on tourists visiting the United States, compared with elsewhere, help explain why travel exports are rebounding far more slowly than travel imports.

Net trade is on track to make a small contribution to GDP growth in the third quarter. July’s trade data suggest net exports won’t significantly boost third-quarter GDP. That said, it will depend on how trade evolves during the remaining two months of the quarter, amid ongoing supply issues and capacity constraints.

Sources: Department of Commerce, Trade Data

Most Popular

Dying Careers You May Want to Steer Clear Of
careers

Dying Careers You May Want to Steer Clear Of

It’s tough to change, but your job could depend on it. Be flexible in your career goals – and talk with your kids about their own aspirations, because…
September 13, 2021
5 Top Dividend Aristocrats to Beef Up Your Portfolio
dividend stocks

5 Top Dividend Aristocrats to Beef Up Your Portfolio

The 65-member Dividend Aristocrats are among the market's best sources of reliable, predictable income. But these five stand out as truly elite.
September 14, 2021
7 Best Commodity Stocks to Play the Coming Boom
commodities

7 Best Commodity Stocks to Play the Coming Boom

These seven commodity stocks are poised to take advantage of a unique confluence of events. Just mind the volatility.
September 8, 2021

Recommended

Kiplinger's Economic Outlooks
Economic Forecasts

Kiplinger's Economic Outlooks

Regularly updated insights on the economy’s next moves.
September 16, 2021
October Is a Spooky Month for Stocks
Markets

October Is a Spooky Month for Stocks

The risk now is a surprise shift to tighter monetary policy by the Federal Reserve.
August 26, 2021
Long-Term Rates Will Edge Higher
Economic Forecasts

Long-Term Rates Will Edge Higher

Yields on bank savings accounts will stay low. Home mortgage rates will remain affordable.
July 30, 2021
The Most Expensive Natural Disasters in U.S. History
Economic Forecasts

The Most Expensive Natural Disasters in U.S. History

Wind, water, fire and drought have all wreaked havoc on the United States. What’s been the worst?
July 1, 2021