WASHINGTON – A record level of exports and a drop in oil prices narrowed the U.S. trade deficit in July to its lowest point in three months. The jump in exports could give the economy a lift at time when it is at risk of another recession.
The trade deficit fell to $44.8 billion in July, down 13.1 percent from June, the Commerce Department reported Thursday.
American manufacturers sold more cars, airplanes and industrial machinery in foreign markets. Exports rose 3.6 percent to a record $178 billion.
Imports dipped 0.2 percent to $222.8 billion. Most of the decline came from a drop in oil imports. Oil imports fell 6 percent to $35.5 billion, mostly because oil prices fell.
Paul Dales, senior U.S. economist for Capital Economics, said the report suggests the trade deficit won't drag on growth in the July-September quarter It may even give growth a boost. But he said the annual growth rate for exports has slowed from earlier in the year, so trade shouldn't offset weakness in the broader U.S. economy.
Separately, the Labor Department said the number of people who applied for unemployment benefits ticked up last week by 2,000 to a seasonally adjusted 414,000. Companies aren't significantly increasing layoffs. But little hiring is taking place.
Applications need to fall below 375,000 to indicate sustainable job growth. They haven't been below that level since February.
The overall economy grew at a meager 0.7 percent in the first six months of this year, the slowest growth since the recession ended two years ago. The economy added no net jobs in August, the weakest month for hiring since September 2010.
Economists predict a modest rebound to around 2 percent growth in the second half of this year. Some of that strength is expected to come from stronger export sales.
A narrowing trade deficit adds to economic growth. It signals that more products are being made in the United States and less money is flowing overseas.
The U.S. trade deficit through July was running at an annual rate of $565.3 billion, 13.1 percent higher than last year's imbalance of $500 billion.
For July, the U.S. trade deficit with China rose 1.1 percent to $27 billion, the largest imbalance since September 2010. Through the first seven month of this year, the deficit with China is 10 percent higher than the same period in 2010, a year when the trade gap between the two nations hit a record high.
The Obama administration has been applying pressure to China to allow its currency to rise more quickly in value against the dollar as a way of boosting U.S. exports to China and dampening Chinese imports to this country.
The U.S. deficit with Japan jumped by 30 percent in July to $5.3 billion, reflecting a sharp rebound in imports from Japan as that country's factories resumed more normal production following the March 11 natural disasters. The curtailment of Japanese shipments to the United States restricted U.S. production in such areas as autos where American factories are dependent on getting component parts from Japan.
Oil imports declined because the volume of shipments fell as did the price. The average price of a barrel of imported crude oil dropped to $104.27 in July, down from $106 in June. Oil prices have declined further since then so economists are expecting oil imports to fall in in coming months.
The record for exports hit in July came after two months in which exports had fallen as global demand weakened.