Lower Oil Prices Narrow US Trade Deficit in June

The latest government data shows that the United States saw its smallest trade deficit in the month of June in one and a half years as cheaper per barrel oil prices limited import bills. The same data suggests an upward change in quarter two’s growth.

The trade deficit lowered 10.7% to a balance of $42.9 billion, a level not seen since December of 2010, said the Commerce Department. Economists surveyed by Reuters had anticipated the gap to decrease to only $47.5 billion.

The fuel import bill dropped as the average per barrel oil prices posted its highest fall since January of 2009.

The total imports of services and goods decreased 1.5% to $227.9 billion. Exports had a 0.9% increase to a record high of $185 billion.

Trade decreased by about one third of a percentage point from the second quarter’s gross domestic product. The economy’s annual growth rate was 1.5%, a reduction from the 2% level experienced in the first quarter.

Although exports appeared strong in June, anecdotal proof suggests that it is weak due to soft global demand. The export index of the Institute for Supply Management had its third straight drop in July. There are also concerns that the worst drought since 1956, affecting 50% of the nation, may impact agricultural exports.

The exports of the U.S. to the European Union’s 27 countries gained 1.7% to $23.3 billion in the month of June. The entire EU was the second biggest export market of the United States in the past year and, in the period from January to June 2012, exports were higher by 2.9% compared to the same period last year.

Exports from the United States to China, which are slowly growing compared to the past years, dropped 4.3% in the month of June.

China has been one of the quickest developing markets for America’s commodities and exports were higher by 6.7% in the first half of this year.

By: Chris Termeer

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