US trade deficit shrinks significantly in July

America´s trade shortfall with the rest of the world shrank rapidly in August as commodity exports increased sharply, pointing to a potentially sizeable contribution from net trade to economic growth in the third quarter, although both exports and imports had declined year-to-date.

The US trade deficit in goods and services dropped from $44.7bn in June to $39.5bn in July, according to the Department of Commerce.

Overseas sales of goods and services increased by $3.4bn month-on-month to reach $186.3bn, while imports declined by $1.8bn to $225.8bn.

Exports of goods increased by $3.4bn to $124.1bn, led by increased sales of soybeans, precious metals and chemicals-fertilizers, which saw the deficit in the goods balance drop by $5.3bn to $60.3bn.

Goods imports on the other hand fell by $1.9bn to $184.4bn as the US sourced fewer consumer and capital goods (excluding automobiles) from abroad.

The services surplus on the other hand slipped by $0.1bn to $20.9bn.

"Assuming both exports and imports increased by 0.2% m/m over the remaining two months of this quarter, then exports would increase by roughly 10% annualised over the quarter as a whole, with imports up by around 1%.

"In short, net external demand would make a big positive contribution to GDP growth, adding to the evidence that the latter will be 3% annualised or higher," said Paukl Ashworth, chief US economist at Capital Economics.

Year-to-date total exports had shrunk by 4.8% to $63.7bn while imports were 4.0% weaker at $64.2bn.