US trade deficit at three-and-half year low in June

The US trade deficit in June hit its lowest level in over 3-1/2 years to $34.2 billion from $44.1 billion a month ago on the back of strong exports and a significant decline in imports, according to data released by the US commerce department yesterday. 

The trade gap was well below the expected $43.5 billion median forecast based on a Bloomberg survey of economists.

Exports of goods and services in June were $191.2 billion, up $4.1 billion from May, while imports were 225.4 billion, $5.8 billion less than the previous month.

The increase in exports over May was primarily due to rise in exports of industrial supplies and materials, capital goods and consumer goods.

Meanwhile, decrease in imports reflected drops in industrial supplies and materials, consumer and other goods.

According to some analysts, the latest trade figures signal an encouraging state of the US economy, and a possible upward revision of the second quarter gross domestic product (GDP).

The nation's economy posted a better than expected 1.7-per cent growth in the June quarter on an annualised basis, after registering a 1.1-per cent expansion in the first quarter. (See: US economy grows at 1.7% in Q2)

The economic expansion in the second quarter was primarily due to increases in personal consumption, exports, residential investment and private inventory which were partly offset by negative contributions from federal government spending and imports.

Goods deficit decreased to $53.2 billion, down by $9.7 billion from May and services surplus increased to $18.9 billion, a 0.2-billion improvement over the previous month.

Compared with June 2012, the goods and services deficit decreased by $8.2 billion. Exports increased $6 billion or 3.2 per cent, while imports were down $2.3 billion or 1 per cent.

June trade deficit with China for goods narrowed by $1.3 billion to $26.6 billion, while that with the European Union reduced by $3.7 billion to $7.1 billion.

For the three months ending June, the average trade gap was $1 billion down at $39.5 billion compared to the average figure for the three months ending May.

The trade deficit for the first half of the year was down 13 per cent at $242 billion from $278 billion for the comparable period last year. Total exports during the six months were up 2 per cent at $1.2 trillion while total imports fell 0.7 per cent to $1.37 trillion.

Separately, the purchase manager's index (PMI) data released yesterday for the UK showed a sharp increase in services sector activity in July. 

The PMIs for the construction and manufacturing sector were also strong, indicating that growth in Europe's second-largest economy is gaining momentum. (See: UK PMI data for services sector shows welcome uptick)

The UK's GDP has grown 0.6 per cent in the second quarter over the first quarter with all its major components registering positive growth in over three years. (See: UK GDP growth quickens to 0.6% in Q2)