U.S. advance goods trade deficit widens in June, likely to widen over time and weigh on growth in 2018

The U.S. advance goods trade deficit broadened in June. The deficit came in at USD 68.3 billion, widening from USD 64.8 billion in the prior month. Exports dropped 1.1 percent sequentially, while imports rose 0.9 percent in nominal terms. Since February, the nominal deficit in goods has narrowed against the expectations for a fiscal stimulus-led widening.

This was viewed as driven by special factors that were unlikely to last; namely, the normalization of auto sales after the hurricanes last fall, which led to a moderation in imports growth, and the sharp rise in soybean exports that is likely to have reflected a reaction to possible tariffs, noted Barclays in a research report.

The goods balance for the month for June implies that these transitory events are coming to an end. Auto imports rose 1.9 percent sequentially and imports of consumer goods rose 3.6 percent. Food, feed, and beverage exports, which had risen sharply for three straight months, rose just 0.2 percent. Overall, while net trade should make a major positive contribution to growth in the advance estimate of the second quarter of GDP, the trade deficit is expected to widen over time and result in a drag on growth over the rest of 2018, said Barclays.

At 17:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at -0.552431. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex