The trade deficit surprisingly contracted 2.6% in July to $57.9 billion despite a record-high oil bill as export growth picked up. The Commerce Department said that import growth went down in July while exports picked up slightly, offsetting a record $18.5 billion bill for petroleum imports on the back of sky-high oil prices. Analysts said the deficit could narrow further once the full impact of Hurricane Katrina is gauged in a couple of months, but that the longer-term trend remains higher.
Wall Street was expecting the trade deficit to widen to $59.8 billion in July. But it actually fell from a revised $59.5 billion in June.
Another item on the balance sheet that hit a new high was the U.S. deficit with China. It went up 0.3% over the month to $17.7 billion, accounting for nearly a third of the total deficit.
Americans' appetite for foreign consumer goods lessened, with medicine and capital goods imports notably going down. Exports of industrial supplies and materials, capital goods such as civilian aircraft, and autos all went up.
The latest Commerce Department report evaluated the trade performance before Katrina. Economists expect the hurricane will have a significant impact on the trade balance later this year, as some of the major hubs of trade along the Gulf of Mexico coast were knocked out of commission.
Copyright Agence France-Presse, 2005
