U.S. Trade Gap Widens Less, And For Once It's (Mildly) Good News

Source: U.S. Commerce Department

The U.S. trade deficit dipped as the recession set in.

The U.S. trade deficit rose less than expected in June, to $27 billion from $26 billion, the Commerce Department reports. Economists had predicted it would rise to $28.7 billion.

The trade deficit measures the difference between the dollar value of goods the U.S. buys from other countries and the dollar value of the goods it sells to other countries. The jump of just 4 percent in June reflects a bump of more than 2 percent in non-oil exports as demand for American products increased just a bit. Among the sectors selling more was the automotive industry. Exports of consumer goods, the more daily stuff people buy, were flat.

Imports rose 2.3 percent, and most of that was due to the higher price of oil. Prices for oil — and food — tend to rise and fall more rapidly than for other goods, so economists often separate them out of their calculations. Consumer will feel the difference in their wallets, even though oil and food may not be helpful in understanding the overhaul situation.

In June, for instance, America rang up a $3.9 billion trade deficit in oil alone. If you take out that factor, the deficit fell to $9.8 billion from $12.7 billion, writes High Frequency Economics' Ian Shepherdson, adding, "This is the lowest deficit since June 1998."

The U.S. trade deficit has been falling as the recession has deepened, and it hasn't necessarily been a sign of health. Data from the International Monetary fund show that global trade is now in the first deep, sustained plunge since the 1970s. Americans bought less of just about everything, and so did the rest of the world.

High Frequency Economics)

The collapse in global trade.

Today's report includes some signs of hope for the U.S. economy. Exports notched their second straight month of growth, with non-oil exports rising 1.4 percent in May and 2.1 percent in June.