–Exports +$2.8B, as Civ Aircraft +$1.4B; China NSA Bal -$25.9B

By Joseph Plocek

WASHINGTON (MNI) – The U.S. July trade balance improved to -$42.8
billion, a number that is more in line with recent trends, suggesting a
limited impact on U.S. real growth. Imports fell after surging the
prior period.

July’s trade balance of -$42.8 billion compares to -$49.8 billion
in June as imports plunged $4.2 billion and exports gained $2.8 billion
to their highest level since August 2008. This is a perfect combination
for reducing the deficit, and one could be enthusiastic about the
changes if they did not merely offset opposite moves the prior month.

Imports included -$1.9 billion consumer goods where gem diamonds,
pharmaceuticals, televisions, and toys fell. Also in imports, autos
posted -$0.7 billion, and oil-related imports fell $0.9 billion.

The exports gain was centered in +$1.4 billion in civilian
aircraft, but oil, gold, and machinery also gained. Non-oil exports were
$100.9 billion in total, their best since September 2008.

July’s oil deficit was -$20.9 billion, the lowest since November
2009’s -$19.9 billion. Crude oil imports were little changed in
quantity, but the average price fell 35 cents, or -0.5%, to $72.09.

The real trade balance stands only slightly narrower than the Q2
average, suggesting only a minor lift to GDP.

Unadjusted data show the trade balance with China at -$25.9 billion
after -$26.2 billion in June, with Japan at -$4.95 billion after -$5.2
billion, and with OPEC at -$8 billion after -$8.9 billion. The imports
from China are centered in apparel and overall reached their highest
since fall 2008, and from Japan in autos and electronics. The large
deficits show that U.S. consumers continue to depend on inexpensive
imported goods and oil.

The unadjusted trade balance with the European Union was -$9.9
billion after -$7.8 billion in June as exports to that area fell.
Meanwhile, imports from Germany surged to their highest since October
2008 at $7.4 billion, and imports from Italy and France also gained.

The main puzzle from the data is why June saw a jump in imports and
trade that was then reversed. Perhaps this movement came before a growth
slow-down was apparent.

**Market News International Washington Bureau: (202)371-2121**

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