Soaring crude oil imports at record prices overwhelmed another solid export performance, increasing the U.S. trade deficit by 5.7 percent in July to $62.2 billion, its highest level in 16 months, the Commerce Department reported Thursday.
Although U.S. exports increased by $5.4 billion in July, the nation’s petroleum import bill surged $6.2 billion to a monthly record $51.4 billion. The average price for imported oil jumped to $124.66 per barrel, a record that was 90 percent higher than the average imported-oil price a year ago. Crude oil imports increased by 1.1 million barrels per day to more than 11 million barrels per day.
The $62.2 billion trade deficit for July, which reflected a $3.4 billion increase over June’s upwardly revised deficit of $58.8 billion, was significantly higher than economists expected. The trade deficit with China increased $3.4 billion in July to $24.9 billion, while deficits also increased with Japan, Canada and the European Union.
Trade has been one of the few strong points for the U.S. economy during the past year. In the second quarter, when the economy expanded by a surprising 3.3 percent annual rate, the trade sector contributed more than 90 percent of that growth.
Excluding the trade sector, the U.S. economy would have declined by 1.1 percent during the fourth quarter and would have increased by only 0.1 percent during the first quarter and 0.2 percent during the second quarter.
The boost to the economy from trade during the third quarter will not be as robust as the second quarter.
“Trade volumes suggest that trade will add at least one percentage point to third-quarter growth,” said Nigel Gault, chief U.S. economist for Global Insight. Oil prices have fallen considerably from their July peak of nearly $150 per barrel, and the U.S. trade deficit should benefit from that plunge in the months ahead, Mr. Gault said.
A depreciating dollar helped to spur record export performance in recent years, but the dollar has strengthened in recent months. Meanwhile, growth in the economies of many U.S. trading partners, including Germany and Japan, has turned negative.
Although exports continue to rise, a slowdown in their growth rate would “underscore a new vulnerability” for the American economy as overseas growth “appears to be slowing abruptly,” David Resler, chief economist at Nomura Securities, told clients in a note.