WASHINGTON: The U.S. trade deficit soared in June as Americans boosted purchases of foreign goods, though broader trends portray a sluggish economy.
The trade gap grew 8.7% from a month earlier to a seasonally adjusted $44.5 billion, the widest in 10 months, the Commerce Department said Friday. Imports increased 1.9% while exports rose 0.3%. Economists surveyed by The Wall Street Journal expected a deficit of $43.2 billion in June.
The pickup in both exports and imports offered early signs that international trade, which has slumped over the past year due to broad economic malaise, could be improving. But it also reflected temporary factors—such as a surge in oil prices, which have since retreated—and came against a backdrop of slowing growth in the U.S.
“Slower growth abroad and uncertainty following the U.K. referendum vote are likely to dampen demand for U.S. exports,” Barclays economists said in a note to clients. They said they expect the trade gap to restrain economic growth in the second half of the year.
A wider trade deficit translates into slower economic growth in the U.S. because it means Americans are spending more money on foreign products instead of American goods. But a surge in imports also points to underlying strength of U.S. households, since it means they have enough money and confidence to boost spending.
The export rise, while modest, suggests U.S. factories continue to stabilize after being undermined by troubles in the global economy late last year.
The dollar has weakened against other currencies since March after strengthening over the winter. But it remains substantially stronger compared with earlier in the recovery. That has driven up the price of American goods abroad, weighing on sales of U.S. goods and services to foreign countries, while lifting imports to the U.S.
Oil markets, meantime, have retreated over the past month after rebounding this spring. The latest decline reflects growing concerns of a stubborn supply glut, as oil-producing countries step up production despite weak demand.
Trade between nations is likely to remain sluggish as the global economy continues to lag. The International Monetary Fund projected last month that the global economy will grow 3.1% this year, matching last year as the weakest since the financial crisis.
Friday’s report illustrated the weak trade picture. Through the first half of this year, exports declined 4.7% compared with the same period a year earlier, and imports fell 4.3%. The deficit fell 2.3% over the period. Still, Friday’s report offered tentative signs of improving trade.
Exports grew due to higher sales abroad of food, consumer goods such as antiques and artwork, and capital goods such as civilian aircraft.
Imports expanded due largely to higher oil prices, but also due to increased purchases of consumer goods like pharmaceuticals and cellphones. Capital goods purchases also grew.
