WASHINGTON - The U.S. trade deficit shrank unexpectedly in June as the weak U.S. dollar helped push exports higher and overpowered record high prices for imported oil, a Commerce Department report showed on Tuesday.
The trade gap totaled $56.8 billion, down from a revised estimate of $59.2 billion in May. The monthly tally was also much lower than the $61.5 billion midpoint estimate of 73 analysts surveyed by Reuters before the report.
Both exports and imports of goods and services set records in June, but exports rose by 4.0 percent compared to a 1.8 percent gain for imports.
The U.S. trade sector has been one of the bright spots for an economy struggling with a deep housing downturn and credit crunch, and analysts said the data suggested growth in the second quarter was stronger than previously thought.
A preliminary estimate released last month showed U.S. gross domestic product expanded at a 1.9 percent annual rate in the second quarter, but would have shrunk at a 0.5 percent pace without a big contribution from trade.
The June trade numbers are "slightly favorable for second-quarter GDP," said Gary Thayer, senior economist at Wachovia Securities in St. Louis. "Imports will be a little less of a drag on economic growth than appeared earlier. But weaker imports still reflect the overall weakness in the U.S. economy."
U.S. Commerce Secretary Carlos Gutierrez agreed it could prompt the department to raise second-quarter economic growth from its initial estimate of 1.9 percent.
"It's a very strong month for exports," Gutierrez said. "The growth is coming from Brazil, it's coming from Russia, it's coming from India, it's coming from the Middle East ... It's very broad-based," he said.
SMALLER TRADE GAP CUTS BOTH WAYS
The smaller-than-expected trade gap "will support growth going into the third quarter," said Kurt Karl, chief U.S. economist at Swiss Re in New York.
But the narrowing of the trade deficit also is one more piece of evidence the U.S. economy may be in a recession because it shows consumers are buying less, he said.
Meanwhile, a recent firming of the U.S. dollar and lower oil prices are reducing inflation risks, making it likely the Federal Reserve will continue to resist raising interest rates, said Joel Naroff, president and chief economist at Naroff Economic Advisors.
Traders looked past the report to other factors. U.S. stocks fell on a spate of bad financial sector news, including that JPMorgan Chase (JPM.N: Quote, Profile, Research, Stock Buzz) has racked up $1.5 billion of losses so far this quarter on mortgage-linked assets.
But the renewed credit fears pushed U.S. Treasury prices higher. The dollar slipped from a six-month high against the euro, breaking a five-session rally as investors locked in profits ahead of key economic data later in the week.
In June, the cheap greenback helped U.S. exports set records in several categories, including overall goods, overall services, petroleum, food, feeds and beverages, industrial supplies and materials, capital goods and consumer goods.
U.S. exports to Mexico, the European Union and South and Central America also set records in June.
Even with the dollar's recent rise, "I remain optimistic that exports will continue to grow, but at what rate I'm not willing to predict," Gutierrez said.
IT'S ALL ABOUT OIL
In contrast to the broad-based export rise, most of the import gain came from one area, petroleum, although imports of services also hit a record.
In addition, a pair of private industry reports suggested the boost that government economic stimulus checks gave to consumer spending may be waning.
Consumer spending excluding cars rose 1.0 percent in July on a seasonally adjusted basis, after a 1.1 percent gain in June, said SpendingPulse, the retail data service of MasterCard Advisors, an arm of MasterCard Worldwide (MA.N: Quote, Profile, Research, Stock Buzz).
However, much of the gain reflected high gasoline prices. Excluding both cars and gasoline, sales fell 0.7 percent in July.
Weekly chain store sales fell 1.1 percent in the week ended August 9, despite the start of the annual back-to-school shopping season, according to a report from the International Council of Shopping Centers and UBS Securities.
The monthly crude oil import bill was a record $34.9 billion, as the average price for imported oil jumped to a record $117.13 per barrel.
The month-to-month rise in oil prices of $10.85 per barrel was also a record, as were imports from Saudi Arabia and other members of the Organization of Petroleum Exporting Countries. The U.S. deficit with OPEC was a record $18.1 billion.
U.S. crude oil prices continued to rise sharply in July to a record above $147, but have retreated this week, with U.S. light sweet crude oil back to around $113 a barrel on signs of weaker global demand and under pressure from the rising U.S. dollar.
The closely watched U.S. trade deficit with China rose 1.8 percent in June to $21.4 billion, and through the first six months of the year totaled $117.5 billion -- just fractionally higher than in the same period last year.
The trade gap totaled $56.8 billion, down from a revised estimate of $59.2 billion in May. The monthly tally was also much lower than the $61.5 billion midpoint estimate of 73 analysts surveyed by Reuters before the report.
Both exports and imports of goods and services set records in June, but exports rose by 4.0 percent compared to a 1.8 percent gain for imports.
The U.S. trade sector has been one of the bright spots for an economy struggling with a deep housing downturn and credit crunch, and analysts said the data suggested growth in the second quarter was stronger than previously thought.
A preliminary estimate released last month showed U.S. gross domestic product expanded at a 1.9 percent annual rate in the second quarter, but would have shrunk at a 0.5 percent pace without a big contribution from trade.
The June trade numbers are "slightly favorable for second-quarter GDP," said Gary Thayer, senior economist at Wachovia Securities in St. Louis. "Imports will be a little less of a drag on economic growth than appeared earlier. But weaker imports still reflect the overall weakness in the U.S. economy."
U.S. Commerce Secretary Carlos Gutierrez agreed it could prompt the department to raise second-quarter economic growth from its initial estimate of 1.9 percent.
"It's a very strong month for exports," Gutierrez said. "The growth is coming from Brazil, it's coming from Russia, it's coming from India, it's coming from the Middle East ... It's very broad-based," he said.
SMALLER TRADE GAP CUTS BOTH WAYS
The smaller-than-expected trade gap "will support growth going into the third quarter," said Kurt Karl, chief U.S. economist at Swiss Re in New York.
But the narrowing of the trade deficit also is one more piece of evidence the U.S. economy may be in a recession because it shows consumers are buying less, he said.
Meanwhile, a recent firming of the U.S. dollar and lower oil prices are reducing inflation risks, making it likely the Federal Reserve will continue to resist raising interest rates, said Joel Naroff, president and chief economist at Naroff Economic Advisors.
Traders looked past the report to other factors. U.S. stocks fell on a spate of bad financial sector news, including that JPMorgan Chase (JPM.N: Quote, Profile, Research, Stock Buzz) has racked up $1.5 billion of losses so far this quarter on mortgage-linked assets.
But the renewed credit fears pushed U.S. Treasury prices higher. The dollar slipped from a six-month high against the euro, breaking a five-session rally as investors locked in profits ahead of key economic data later in the week.
In June, the cheap greenback helped U.S. exports set records in several categories, including overall goods, overall services, petroleum, food, feeds and beverages, industrial supplies and materials, capital goods and consumer goods.
U.S. exports to Mexico, the European Union and South and Central America also set records in June.
Even with the dollar's recent rise, "I remain optimistic that exports will continue to grow, but at what rate I'm not willing to predict," Gutierrez said.
IT'S ALL ABOUT OIL
In contrast to the broad-based export rise, most of the import gain came from one area, petroleum, although imports of services also hit a record.
In addition, a pair of private industry reports suggested the boost that government economic stimulus checks gave to consumer spending may be waning.
Consumer spending excluding cars rose 1.0 percent in July on a seasonally adjusted basis, after a 1.1 percent gain in June, said SpendingPulse, the retail data service of MasterCard Advisors, an arm of MasterCard Worldwide (MA.N: Quote, Profile, Research, Stock Buzz).
However, much of the gain reflected high gasoline prices. Excluding both cars and gasoline, sales fell 0.7 percent in July.
Weekly chain store sales fell 1.1 percent in the week ended August 9, despite the start of the annual back-to-school shopping season, according to a report from the International Council of Shopping Centers and UBS Securities.
The monthly crude oil import bill was a record $34.9 billion, as the average price for imported oil jumped to a record $117.13 per barrel.
The month-to-month rise in oil prices of $10.85 per barrel was also a record, as were imports from Saudi Arabia and other members of the Organization of Petroleum Exporting Countries. The U.S. deficit with OPEC was a record $18.1 billion.
U.S. crude oil prices continued to rise sharply in July to a record above $147, but have retreated this week, with U.S. light sweet crude oil back to around $113 a barrel on signs of weaker global demand and under pressure from the rising U.S. dollar.
The closely watched U.S. trade deficit with China rose 1.8 percent in June to $21.4 billion, and through the first six months of the year totaled $117.5 billion -- just fractionally higher than in the same period last year.
