June Trade Balance

America’s trade balance with the rest of the world improved in June according to the Bureau of Economic Analysis.   The trade deficit dropped by $5.1 billion dollars and is now sitting at a still hefty $42.9 billion shortfall.  Our country’s exports improved by $1.7 billion (+0.9%) as imports fell by $3.5 billion (1.5%) for the month.  With exports now rising faster than imports, the year-over-year trade deficit has decreased by $7.4 billion.

Many components of the economy added to the month’s improvement.  Consumer goods increased by the largest dollar amount ($0.9 billion).  More auto related wares were sold to other countries; industrial supplies and materials exports were higher, and capital goods (equipment investments by companies) increased as well.  The only decrease came from the foods, feeds, and beverage category which was down by $0.8 billion. On the import side of the equation, June’s lower oil prices provided a large decrease in the value of goods purchased by Americans from foreign sources.

The trade balance is far from equilibrium, but the downward trend in the deficit is encouraging.  The gap has been running much lower than it was in the few years before the great recession.  Since the end of the last economic contraction, exports have been growing, and more recently, imports have been going down.  One possible explanation may be that American companies have become more competitive in the global market.  While this could especially apply to our exports, imports may be a different story.  The decline we are seeing there may still be attributable to the same increasing competitiveness, but it may also be explained by a weakening U.S. consumer.  Consumer trends have been showing signs of difficulty recently so Atlas is paying special attention to this area of our economy.  Are you spending enough?   (by C. Cox)