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US July trade gap widens as imports surge

A cargo ship waits to enter port in New York  on February 17, 2012
A cargo ship waits to enter port in New York. The US trade deficit expanded more than expected in July as exports fell and imports surged higher, the Commerce Department reported Wednesday.

The US trade deficit expanded more than expected in July as exports fell and imports surged higher, including record imports of foreign cars and trucks, the Commerce Department reported Wednesday.

The trade gap rose to $39.1 billion, from a revised $34.5 billion in June, and was $4.3 billion smaller than in July 2012.

Analysts on average had forecast a smaller increase in the deficit, to $38.2 billion.

The July deficit was in line with previous readings this year and partly reversed an unexpected plunge in June.

For the three months ending in July, the average trade deficit came in at $39.1 billion.

Over the first seven months of the year the gap totaled $279.6 billion, a 13.1 percent decrease from the same period in 2012, indicating slow improvement in the trade balance.

"The July trade data point to a steady recovery in the US, consistent with the strong rise in private payrolls and other signs that business conditions are positive," said Tu Packard of Moody's Analytics.

"Imports of consumer goods and autos rose, indicating more confidence that consumer demand is strengthening,"

Imports rose 1.6 percent to $228.6 billion in July, with the largest increases in industrial supplies; automotive vehicles and equipment; and consumer goods.

Imports of foreign vehicles jumped 3.1 percent from June to a monthly record of $26.5 billion.

The United States exported $189.4 billion in goods and services in July, down from $190.5 billion in June, reflecting a drop in goods exports while services were virtually flat.

The weaker than expected trade report raised questions about the strength of US growth entering the third quarter. Second-quarter exports that had been stronger than initially estimated contributed to the sharp upward revision of gross domestic product growth to an annual rate of 2.5 percent.

"On balance, the trade data are not really very reassuring about growth. The comprehensive balance of payments framework for exports and imports show clear decelerations of nominal and real exports and imports while the trade deficit gave back a gain it seemed to make one month ago," said Robert Brusca of FAO Economics.

The US trade gap swelled almost 10 percent from June against the European Union, to $13.9 billion. This month's EU data included for the first time Croatia, which joined the bloc on July 1.

The politically sensitive trade deficit with China also ballooned, adding nearly 13 percent over June at $30.1 billion.

IHS Global Insight predicted US export and import volume growth to rebound from around 2 percent in 2013 to around 5 percent in 2014.

"A gradually improving global outlook should support exports while stronger domestic activity pulls in more imports. The foreign trade contribution to real GDP growth should be close to neutral in the second half of 2013," said Gregory Daco, head of US economics for IHS.