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The trade deficit receded from a 19-month high in June. After widening the prior two months, the U.S. trade deficit in goods and services narrowed to a seasonally adjusted $73.1 billion in June, from an upwardly revised $75 billion in May. The trade deficit is a measure of the difference between what the U.S. buys from foreign nations and what it sells overseas. Both exports and imports rose during the month, but exports rose more sharply. However, robust domestic demand, bolstered by a resilient U.S. economy and persistent dollar strength, are contributing to a wider overall trade deficit this year.
Look for exports to remain on solid footing over the next few months. Total exports rose 1.5% from the previous month. The increase was broad-based, led by a large jump in merchandise goods. The robust 3.7% rise in capital goods was primarily due to exports of civilian aircraft, computers and semiconductors. Exports of services fell slightly, with travel exports — or spending by visitors to the U.S. — falling 2%. This year, exports have contended with a weaker global backdrop and a stronger dollar, which makes U.S. goods relatively more expensive abroad. Despite these headwinds, exports increased 3.8% in the first half of 2024 over the first half of 2023.
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Imports are still rising, despite domestic demand starting to cool off. Total imports rose 0.6% in June from the previous month. Imports may not be booming, but they’re still doing better than exports. The gain in imports in June was solid and more evenly shared between goods and services, with solid growth in consumer goods and capital goods. Travel imports — a measure of Americans traveling abroad — rose to a four-month high. By contrast, imports of industrial supplies fell 3.4% during the month. The trade surplus in services fell to $24.2 billion in June. Cooler domestic demand, amid a moderating pace of consumer spending and business investment, will ease imports for the rest of the year.
Trade will likely provide a small net contribution to GDP in the third quarter. After nearly two years of positive contributions to growth, trade has been a substantial drag this year. The bigger trade gap in the second quarter shaved 0.7% off the 2.8% GDP growth in the second quarter. If sustained, the softer pace of import growth over the past few months will help trade turn back into a neutral, or slightly positive, factor for GDP growth.
Source: Department of Commerce, Trade Data
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