US trade gap surges to US$63.6 billion in July on jump in imports

WASHINGTON: US imports jumped nearly 11% in July, driving the trade gap up to US$63.6 billion (RM263.5 billion) in the month, the Commerce Department reported today, far more than economists had expected.

Although American exports also rose in July, it was far less than imports, contributing to the US$10.1 billion jump in the overall deficit – nearly 19% higher than June, according to the report.

Though trade has picked up pace it "remained below pre-pandemic levels, reflecting the ongoing impact of Covid-19, as many businesses continued to operate at limited capacity or ceased operations completely, and the movement of travelers across borders remained restricted," the Commerce Department said in the report.

However the report said it could not quantify or separate the impact of the pandemic on the trade data.

"A strong and sustained rebound in trade flows is uncertain given a still weak global growth and demand backdrop," said Rubeela Farooqi of High Frequency Economics.

Jim Watson of Oxford Economics was more stark, saying that "with the domestic and global recoveries looking vulnerable, we think trade will struggle to keep its strong pace. Downside risks are clear, and we expect total trade volumes to fall a record 14% in 2020."

Big increases were seen in imports of vehicles, parts and engines, industrial supplies and consumer goods in July. Petroleum imports also surged by US$21.5 billion.

The trade deficits in goods alone increased sharply with China and Mexico, to US$28.3 billion and US$11.5 billion respectively.

With trade in services included, the deficit with China in the second quarter – the latest period for which data is available – surged to US$75.8 billion, while the gap with Mexico jumped to US$15 billion, the report said.

Meanwhile, the massive US services sector continued to recover in August, but was growing at a slower pace than in the prior month and employment continued to contract, according to an industry survey released today.

The Institute for Supply Management's services index slipped 1.2 points to 56.9%, with 15 services industries reporting growth.

But that marked the third consecutive month of growth for the sector that comprises about two-thirds of the world's largest economy after contracting in April and May amid the coronavirus pandemic.

Anything above 50% indicates growth.

The last time the sector experienced a downturn was in November and December 2009 during the global financial crisis.

However, the employment index continued to slow last month, with the index at 47.9%, although that was a sharp improvement over July and points to an improving job market, the report said.

"Employment still contracting" but "it's slowing in its rate of contraction, so that's a good sign," ISM survey chairman Anthony Nieves told reporters.

The expansion in services is "still not at pre-pandemic levels, but all signs indicate unless we have a derailment in the next few months that will continue to see this growth going forward," he said.

He noted that survey respondents were "mostly optimistic" as businesses are starting to reopen, but those that have not opened their doors continue to worry about the uncertainty.

"Our business activity is now thriving again, after modifications to our operations," said one firm in accommodation and food services, which pointed to tariff threats as a bigger concern especially regarding aluminum, as well as the rapid rise in lumber costs.

But a wholesale trade company said: "We are significantly down from the pre-Covid-19 level. While month-over-month business activity is picking up, the pace is very slow and very slight." – AFP

source https://www.thesundaily.my/business/us-trade-gap-surges-to-us-636-billion-in-july-on-jump-in-imports-AG3833460