Trade deficit narrows to $42.8 billion in July
By MARTIN CRUTSINGER
AP Economics Writer
WASHINGTON (AP) — The trade deficit narrowed significantly in July as exports
climbed to the highest level in nearly two years, reflecting big gains in sales
of U.S.-made airplanes and other manufactured goods while imports declined.
The July deficit fell 14 percent to $42.8 billion, the Commerce Department
reported Thursday. That was much lower than economists had forecast. The lower
trade deficit should give a boost to overall economic growth.
Exports rose 1.8 percent to $153.3 billion, the best showing since August 2008,
as sales of jetliners, industrial machinery, computers and telecommunications
equipment all posted large gains. Imports, which had been surging, dropped 2.1
percent to $196.1 billion.
Imports of oil edged up a slight 0.1 percent to $26.8 billion but demand for
other foreign products fell sharply. Imports of autos dropped by $713 million
while those for other consumer goods such as clothing, televisions and toys all
dropped sharply. Demand for business machinery and other capital goods also
declined.
The drop in demand for imports reflected the slowdown in the U.S. economy
during the spring as businesses cut back on rebuilding inventories and consumer
demand slackened under the weight of high unemployment.
The surge in the trade deficit in the second quarter had trimmed 3.4 percentage
points in the April-to-June quarter, leaving the gross domestic product rising
at an anemic rate of 1.,4 percent in the spring. The narrowing of the deficit
in July, if it continues, could give a boost to GDP growth in the third quarter.
Through the first seven months of this year, the trade deficit is running at an
annual rate of $495.1 billion, 32 percent higher than the $374.9 billion
deficit for all of 2009, a year when the trade gap narrowed dramatically as a
deep recession cut into demand for imports.
While the deficit is expected to increase this year, economists are hoping that
an improving global economy will boost demand for U.S. exports. So far,
manufacturing has been a standout performer in what has been a sub-par economic
recovery.
For July, the trade deficit with China dropped slightly to $25.9 billion, but
remained the highest for any country. Through the first seven months of this
year, the deficit with China is running 17.7 percent above last year’s pace,
spurring increased calls in Congress for a crackdown on what critics see as
unfair Chinese trade practices such as a currency regime that keeps the Chinese
yuan lower in value against the dollar. American manufacturers contend the yuan
is undervalued by as much as 40 percent, making Chinese products cheaper in the
United States and American goods more expensive in China.