June Trade Deficit Up 7.1%, Negligible Impact on GDP

Our trade deficit increased by 7.1% in June as the value of our exports fell and the value of our imports rose.  The Census report on our international trade in goods and services for June indicated that our seasonally adjusted goods and services trade deficit rose by $2.9 billion to $43.8 billion in June from a May deficit which was revised from $41.9 billion to $40.9 billion. The value of our June exports fell $0.1 billion to $188.6 billion as a $0.2 billion decrease to $127.6 billion in our exports of goods was partially offset by an increase of $0.1 billion to $61.0 billion in our exports of services, while our imports rose $2.8 billion to $232.4 billion on a $2.7 billion increase to $191.1 billion in our imports of goods and a $0.1 billion increase to $41.4 billion in our imports of services.  Export prices averaged 0.2% lower in June, so the real growth in exports was higher by that much, while import prices were 0.1% lower, similarly incrementally increasing real growth in imports...

Our exports of capital goods fell by $769 million to $44,114 million in June on a $310 million decrease in our exports of telecommunication equipment and a $272 million decrease in our exports of commercial vessels including scrap ships.  Our exports of industrial supplies and materials fell by $617 million to $37,135 million on a $283 million decrease in exports of finished metal fabrications, a $197 million decrease in exports of organic chemicals, and a $182 million decrease in exports of crude oil, and our exports of foods, feeds and beverages fell $460 million to $10,495 million, led by a $135 million decrease in soybean exports.  Meanwhile, our exports of consumer goods rose by $795 million to $16,750 million on a $361 million increase in our exports of jewelry and a $283 million increase in our exports of gem diamonds, our exports of automobiles, parts and engines rose by $62 million to $12,702 million, and our exports of goods not categorized by end use rose $538 million to $5,433 million.

Import categories seeing increases in June included a $1,733 million increase to $50,603 million in our imports of consumer goods, largely on a $1,344 million increase in our imports of pharmaceuticals and a $454 million increase in our imports of cell phones. We also saw a $1,178 million increase to $41,919 million in our imports of industrial supplies and materials, on a $921 million increase in our imports of crude oil and a $465 million increase in our imports of petroleum products other than fuel oil, a $663 million increase to $11,140 million in our imports of foods, feeds and beverages, led by a $383 million increase in our imports of fish and shellfish, a $332 million increase to $29,758 million in our imports of automobiles, parts and engines, and an $8 million increase to $6,792 million in our imports of goods not categorized by end use.   Partially offsetting those increases was a $1,316 million decrease to $49,057 million in our imports of capital goods, as we imported $574 million less computers and $448 million less of other industrial machines not separately listed in June.  For more details, two itemized lists of the value of more than 200 export and import line items, both monthly and year to date, can be viewed in table form in exhibit 7 and exhibit 8 of the full pdf for this release.

While the trade report that is usually released about a week after the release of an advance estimate of GDP has typically resulted in major revisions to GDP, the technical notes for last week's estimate of 2nd quarter GDP indicated that they made use of a new monthly release from the Census, "Advance Report: U.S. International Trade in Goods," which has some basic tables on just our trade in goods, but not the details of this full report.  In computing GDP, then, the BEA assumed June goods exports were valued at $126,558 million and goods imports were valued at $188,814 million for a net goods trade deficit of $62,256 million.  This week's full report on our trade in goods and services for June indicates that June exports of goods were valued at $126,630 million, and imports were valued at $189,268 million, for a net goods trade deficit of $62,639 million, $283 million greater than was used in the GDP computation.  Assuming that the deflators to these revised figures were applied in the same proportion that they were in the GDP report, this would result in a small decrease in the 2nd quarter's improvement in trade, from a decrease in the trade deficit at an annual rate of 3.7% as reported in the advance 2nd quarter GDP report to a decrease at a annual rate of 3.5% seen here. The subtraction from 2nd quarter GDP resulting from this revision would be a negligible 0.03 percentage points in 2nd quarter growth.

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errata

i am going to make a correction to the above because i had just subtracted the June change in net exports ($283 million) from the second quarter figure in the GDP report in computing the change to 2nd quarter growth, and made the same mistake when i checked my figures twice...problem is that the quarterly figures in the GDP report are as we all know annualized, and i didnt allow for the annualization of the $$283 million...hence, the subtraction from 2nd quarter GDP is not 0.01 percentage point, it's 0.03 percentage points...

by rights, i should have backed out exports and imports separately using the deflators for export goods and import goods respectively, which would have insured accuracy...i'll try doing that next time..

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rjs

that's ok

Annualization can get ya every time.

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