U.S. trade gap in goods, services narrows for a fourth month

The U.S. trade deficit shrank for a fourth straight month in July, reflecting a decline in the value of imports and a slight pickup in exports that are seen helping provide a lift to third-quarter economic growth.

The gap narrowed by 12.6% from a month earlier to $70.65 billion, the smallest since October, Commerce Department data showed Wednesday. The median estimate in a Bloomberg survey of economists called for the deficit to narrow to $70.2 billion. The figures aren’t adjusted for inflation.

The value of goods and services exports increased 0.2% to a record $259.3 billion while imports declined 2.9% to a five-month low of nearly $330 billion.

Inbound shipments of consumer goods plummeted 9.8%, the most in data back to 1992. U.S. retailers are likely dialing back orders with overseas suppliers as they focus on getting inventories more in line with sales.

Rapidly rising prices are weighing on domestic demand, limiting Americans’ wherewithal to spend. The leftover income is increasingly being spent on services and experiences in the wake of a pandemic-fueled boom in outlays on merchandise.

On an inflation-adjusted basis, the July merchandise trade deficit shrank to $103.4 billion, the smallest since October.

The decline in the value of imports of consumer goods, unadjusted for inflation, was driven by decreases in pharmaceutical preparations and toys, games and sporting goods. Industrial materials and foods imports also fell. Inbound shipments of motor vehicles and capital goods increased.

U.S. exports of capital equipment, including industrial machinery, computer accessories and telecommunications gear, helped boost total exports.

Digging deeper:

• The nominal merchandise-trade deficit shrank 8.2% to $91.09 billion.

• Travel exports – or spending by visitors to the US – rose 5.2% to a more than two-year high of $11.59 billion.

• Travel imports, a measure of Americans traveling abroad, fell 3.1% to $9.23 billion.

• The U.S. merchandise-trade deficit with China narrowed 6.9% to about $34.4 billion.