The numbers: An early look at trade patterns in July showed a widening in the nation’s trade deficit to the highest level in five months, perhaps a sign that growth will slow down a little in the third quarter from the torrid pace in the April-June period.
The trade gap in goods — services are excluded — rose 6.3% to $72.2 billion from a revised $67.9 billion in June, the government said Tuesday. That’s the highest rate since February. Economists were looking for the deficit to widen to $69.4 billion.
The government will release overall trade numbers next week, but the size of the deficit is tied to changes in exports and imports of goods. Services don’t change much month to month.
An advanced look at wholesale inventories estimated a 0.7% increase in July. And an early look at retail inventories estimated a 0.4% increase.
What happened: There were widespread reductions in exports in July, which fell for the second month in a row. Exports of capital goods and consumer goods help pace the month’s losses. At the same time, the gains in imports were across the board, with the only monthly drop for consumer goods.
The big picture: The strong U.S. economy is boosting imports. On the other hand the global economy has softened after a strong start in the year. Exports are also being held down by the rising dollar. The U.S.-Mexico agreement reached Monday let to hopes that the trade disputes would devolve into trade wars.
What they are saying: The decline in exports could also be some retaliation on U.S. goods from the Trump administration’s tough global trade negotiation stance, said Robert Brusca, chief economist at FAO Economics.
Market reaction: Stocks were set to open higher a day after the U.S. and Mexico announced their deal. Futures for the Dow Jones Industrial Average YMU8, +0.29% were higher.
