The US trade deficit fell by $3.2 billion in July to $70.1 billion from $73.2 billion in June as imports declined due to shortages and a shift in domestic spending from goods to services.
Source: U.S. Department of Commerce
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Goods imports declined by 1.2% to $236.3 billion, likely hampered by supply constraints. Demand is also rotating to services from goods as vaccinations against COVID-19 continues.
US exports rose by 1.3% to $212.8 billion in July. Goods exports jumped 1.8% to $148.6 billion.
If maintained, the contracting trade deficit could push trade to improve gross domestic product growth in Q3 after slowing down GDP for four consecutive quarters.
Meanwhile, with businesses keen to rebuild inventories that were depleted in the first half of the year, July’s decline in goods imports could be short-term.
Growth estimates for Q3 are converging around a 5% annualized rate. The economy improved at a 6.6% rate in the second quarter.