Analysts at Nomura note that the total trade deficit of US widened to $50.1bn in July, mostly in line with expectations (Nomura: $49.6bn, Consensus: $50.2bn), from $45.7bn in June.
Key Quotes
“The widening in the deficit was led by slowing goods exports, down 1.6% m-o-m, with steep declines in exports of aircraft and soybeans.”
“Exports of soybeans picked up sharply in May ahead of the imposition of retaliatory tariffs by China. Exports of soybeans will likely continue to slow as they revert to the previous trend. Exports of consumer goods also fell notably adding to the wider trade deficit in July, but autos exports rebounded 1.7% after falling in past months.”
“Goods imports increased across many categories in July, with total goods imports up 0.9% m-o-m.”
“By trading partners, the trade deficit with the EU and China continued to widen.”
“Incoming data point to a notable drag from real net exports on GDP growth in Q3 after a solid 1.17pp contribution to Q2 GDP growth which was partly driven by idiosyncratic factors.”
“Looking ahead, a continued divergence between US and external growth, with fiscal stimulus hitting the US economy, could widen the trade deficit further in the near term.”
“GDP tracking update: Overall real trade deficit in July was mostly in line with our expectation, but the deficit in June was revised lower. The downward revision to June suggests stronger contribution to GDP growth from real net exports in Q2. Thus, we raised Q2 past-quarter tracking estimate by 0.1pp to 4.4% q-o-q saar.
For Q3, net exports of aircraft and nondefense ex-aircraft capital goods were stronger than our expectations in July, suggesting less domestic consumption of business equipment during the quarter. Thus, we lowered our Q3 real GDP tracking estimate by 0.1pp to 3.1% q-o-q saar.”
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