U.S. goods trade deficit increases as imports continue to climb

The goods trade deficit in the United States rose in June as imports continued to rise amid strong economic activity, suggesting that trade would likely continue to be a drag on GDP in the second quarter.

According to the Commerce Department, the goods trade imbalance climbed 3.5 % last month to $91.2 billion. Goods imports increased by 1.5 % to $236.7 billion. Imports of food, industrial supplies, and capital items increased.

However, imports of automobiles and consumer goods dropped. While this might indicate a probable slowdown in consumer spending in the coming months, the decline could also be attributed to a global scarcity of semiconductors, which has hampered the manufacture of automobiles and certain household goods.

The United States' economy has recovered more swiftly from the pandemic than its worldwide counterparts, due to substantial fiscal stimulus, low-interest rates, and COVID-19 vaccines. However, supply chain constraints have limited manufacturers' capacity to increase output, resulting in increased imports.

Some analysts are optimistic that fewer products will be imported in the coming months, allowing the trade imbalance to close. However, the Delta version of the virus is causing a rise in new infections across the country, which may restrict service demand.

Meanwhile, Goods exports increased 0.3 % to $145.5 billion, despite a significant drop in food shipments. Capital goods exports have also declined. However, the country exported more automobiles and consumer products.

According to the Commerce Department, wholesale inventories climbed 0.8 % last month after increasing 1.3 % in May. Retail stocks rose 0.3 % after falling 0.8 % in May. Vehicle inventory fell 0.3 % after declining 5.5 % in May.

Retail inventories excluding cars, which are used to calculate GDP, climbed 0.6 % after rising 0.9 % in May.

Source: Reuters

Picture Credits: Business Insider