Tuesday, August 12, 2008

Trade Deficit Narrows More Than Expected

- The Trade Deficit for June narrowed to -$56.8 billion versus estimates of -$62.0 billion and -$59.2 billion in May.

BOTTOM LINE: The US trade deficit unexpectedly narrowed in June as the biggest jump in exports in more than four years overcame record imports of petroleum, Bloomberg reported. Exports jumped 4%, the biggest percentage increase since February 2004, led by record overseas sales of industrial supplies, capital goods, food and consumer goods. US imports rose 1.8%, propelled by a record $44.5 billion in purchases of foreign petroleum. After eliminating the influence of price changes, the trade gap shrank to $39.1 billion, the lowest since December 2001. This should lead to an upward revision to 2Q GDP. The deficit with the Organization of Petroleum Exporting Countries expanded by $200 million to a record $18.1 billion. I expect the Trade Deficit to continue to improve over the intermediate-term on lower commodity prices and still strong exports.

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