A Tuesday report from the Commerce Department showed a 22.4-percent drop in the U.S. trade deficit in June, marking the biggest one-month drop since February 2009. Imports dropped and exports improved, taking the deficit to $34.2 billion from a revised $44.1 billion in May (changed from a previously reported $45.0 billion). That’s the smallest trade shortage since October 2009.
Economists were predicting the trade deficit for June to total $43.0 billion.
Despite weakness in foreign economies, exports of goods and services surged to $191.2 billion in June, up from $187.1 billion in May and representing an all-time high.
The increase in export of goods from May to June was led by industrial supplies and materials (+$1.5 billion), capital goods (+$1.5 billion) and consumer goods (+$1.0 billion). Meanwhile, a decrease in exports of automotive vehicles, parts and engines (-$0.4 billion) pared the advance.
Exports of services rose $0.1 billion to $56.9 billion in June from May. Imports of services were flat month-over-month.
Compared to the first six months of 2012, exports to China were ahead 4.2 percent in the first half of 2013, including a 4.5 percent month-over-month increase in June. In the first half of 2013, exports to Europe have fallen 5.5 percent versus the first half of 2012. In June, though, exports to the European Union were up 1.5 percent, helping to pair the first-half decline.
Imports declined by 2.5 percent to $225.4 billion as oil imports shrank, hitting their lowest level since November 2010. Lower imports of industrial supplies and materials (-$2.5 billion) and consumer goods (-$1.6 billion) were reported.
The three-month moving average of exports, which eliminates monthly volatility, averaged $188.6 billion through June, while the average for imports was $228.1 billion, representing an average trade deficit of $39.5 billion. That’s down from $40.5 billion through May.
The better-than-expected trade imbalance could mean that the Commerce Department will upwardly revise its gross domestic product growth for the second quarter after the trade numbers cut nearly a full percent from the 1.7-percent growth reported last week.
The U.S. trade imbalance with Canada fell by 13.7 percent to $1.6 billion in June. Canada also released its international trade statistics on Tuesday. Statistics Canada said that the nation’s trade deficit narrowed to C$469 million (US$453 million), down significantly from C$781 in May and beating economist predictions of a C$510 trade shortage. May’s figure underwent a large revision from an originally reported deficit of C$303 million.
Canada has been in a trade deficit for 18 months now, the longest string of a deficit in 25 years.
The markets in both countries aren’t reacting to the trade balance reports that topped expectations. On Wall Street, the Dow is off by 100 points, the S&P 500 is down 10 points and the Nasdaq is lower by 28 points. On Bay Street, the TSX Composite has lost 153 points and the smaller Venture exchange has fallen 10 points.