U.S. trade deficit likely to have widened in July

U.S. trade deficit is expected to have widened in July. In the prior month, strong export growth had driven the trade deficit lower. The drop in the trade deficit in June was due to USD 2.4 billion rise in exports of goods and services and a USD 396 million decline in imports. There was widespread strength on the export side of the ledger in June, with exports of capital goods, agricultural products, automobiles and parts, and industrial supplies and materials all recording gains in the month.

The advance estimate of real GDP growth for the second quarter indicated that the real net exports added positively to the overall growth in the June quarter. Given the solid monthly momentum, real exports are expected to grow further in the third quarter. On the contrary, real imports of goods rose just 0.1 percent in both May and June. Unless the recent trends in exports and imports reverse completely in the next month or two, real net exports are unlikely to exert much headwinds on the real GDP growth in the third quarter, noted Wells Fargo in a research report.  The trade deficit is expected to have widened to USD 44.5 billion, stated Wells Fargo.

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