–Crude Prices Fall, Cutting Imports;Gap W/China -$29.4b;W/Japan -$6.8b

By Joseph Plocek

WASHINGTON (MNI) – U.S. July trade data surprised with another good
showing.

The July trade balance posted -$42.0 billion and June was revised
lower to -$41.9 billion.

July imports fell $1.8 billion as crude oil & related printed -$2.4
billion. Oil prices fell below $100 a barrel, averaging $93.83, and oil
imports reached their lowest since November 2010 as volumes stabilized.
Unadjusted data showed a surge in crude imports from Mexico and Canada,
perhaps an indication that cheaper pricing caused stockpiling.

Imports of autos (+$496 million) and consumer goods (+$432 million
overall and centered in toys and cell phones) rounded out the data.
Large imports of cell components are expected to continue ahead of the
roll-out of the newest I-phone later in the year.

July exports printed -$1.9 billion. Nonmonetary gold, used in
jewelry and industrial processing and a recently volatile category,
printed -$1 billion. Auto exports printed -$627 million in a probable
fluke since auto imports gained, and oil re-exports fell $575 million,
probably reflecting pricing.

Elsewhere there were signs of strength. Exports of foods soared
$1.8 billion to their highest on record, perhaps reflecting orders ahead
of the drought’s worst effects, and exports of aircraft printed
+$1.4 billion as Boeing Corp. made good on some of its massive overseas
orders. These basic strengths suggest core exports remain strong.

The trade gap remained narrow despite the impact of the Olympics.

Imports of services gained $0.3 billion in July, with the rise more
than accounted for by an increase in royalties and license fees of $0.4
billion, which included the rights to broadcast the 2012 Summer Olympic
Games. The television station responsible reported these rights cost
more than $1 billion, raising the question of whether the payments will
stretch over several more months or whether the seasonal adjustment
captured part of the effect.

Unadjusted trade gaps by country: China hit a new high -$29.4
billion after -$27.4 billion in June. Japan was -$6.8 billion after -$6
billion, and OPEC was -$8.4 billion after -$8.5 billion, reflecting the
lower pricing on oil. The EU was -$12 billion (its highest since October
2007 as exports to Germany sank) after -$8.4 billion.

The real trade balance in July is only slightly narrower than the
Q2 average. This will add only slightly to Q3 GDP. This favorable result
was better than most expected. The median expectation in a MNI poll of
economists was -$43.5 billion for the July trade number.

**MNI Washington Bureau: (202)371-2121**

[TOPICS: M$U$$$,MU$$$$,M$$FI$,MT$$$$,MAUDS$]