Kiplinger Trade Outlook: Imports Outpaced Exports in July

Resilient household demand led to an increase in consumer goods imports in July.

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The trade deficit widened in July amid a rebound in consumer goods imports. The U.S. trade deficit in goods and services rose to a seasonally adjusted $65 billion in July from $63.7 billion in June. Trade flows have been particularly volatile in recent years as supply chains continue to normalize following pandemic-related disruptions. Year-to-date (i.e., through July), the trade deficit has fallen 21% from the same seven-month period in 2022. The trade balance is now about 37% smaller than at its widest point, in March 2022. Even as trade flows normalize, the deficit remains wider than it was prepandemic. 

Exports growth is still robust, but it is slowing down. The 1.6% increase in total exports was primarily because of an 11.3% jump in exports of motor vehicles and parts. Exports of industrial supplies also bounced after three consecutive months of decline. The reopening of the global economy was good for exports in 2021 and 2022, but it has been less of a driver so far this year as growth has downshifted across the world. 

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An increase in inbound shipments of consumer goods led to a 1.7% rise in total imports. Capital goods purchases also rose during the month. Imports have largely been decreasing since peaking early last year, as shifts in consumer spending translate into lower demand for foreign-made products. Adjusted for price changes, goods imports have fallen 0.6% from a year ago, with reduced imports of food and beverages, industrial supplies, consumer goods and capital goods. 

The services sector continued its path toward normalization. The trade surplus in services rose in July to $25 billion. Historically, the United States imports more goods than it exports but runs a surplus for services. Exports of services rose on higher demand for travel and transportation services by visitors to the United States. Imports of services fell, due to slower demand for overseas travel and transport by Americans.

Trade’s net contribution to GDP growth in the third quarter will be modest. Net exports have boosted growth for four consecutive quarters. The latest trade data indicate that trade will likely provide a small contribution to growth, in the third quarter, as weakening external demand and a resurgent U.S. dollar weigh on exports, while the weakness of imports earlier this year will likely ease.

Source: Department of Commerce, Trade Data

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Rodrigo Sermeño
, The Kiplinger Letter

Rodrigo Sermeño covers the financial services, housing, small business, and cryptocurrency industries for The Kiplinger Letter. Before joining Kiplinger in 2014, he worked for several think tanks and non-profit organizations in Washington, D.C., including the New America Foundation, the Streit Council, and the Arca Foundation. Rodrigo graduated from George Mason University with a bachelor's degree in international affairs. He also holds a master's in public policy from George Mason University's Schar School of Policy and Government.