"Broadly, the U.S. is probably doing a little better by and large than our trading partners"
- Stephen Stanley, chief economist at Pierpont Securities LLC
The difference in the number of exported and imported goods and services widened in July from an almost four-year low, due to soaring imports prices and falling exports. The U.S. trade gap jumped 13.3% to $39.1 billion, compared with $34.5 billion recorded in June that was the smallest since October 2009. Analysts, however, called for a $38.6 billion gap. Figures also showed imports rocketed 1.6% to $228.6 billion, boosted by increased shipments of oil, cars and consumer goods. In contrast, exports dropped 0.6% to $189.4 billion, as companies shipped fewer capital goods, including civilian aircraft and industrial engines. The trade balance was also affected by trading with nation's two largest partners- China and Europe, with the gap of both economies climbing to a fresh high over the same period.
Trade balance data is crucial for market participants as demand for exports and currency are directly linked, therefore, a slowdown in exports, should lead to a weaker U.S. Dollar. However, even despite a growing trade deficit, the improvement in business and consumer sentiment should in theory prompt companies to sustain purchases from its trading partners in the upcoming months. Other reports from the world's largest economy are adding to hopes exports could rebound in August.
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