Trade Gap Widens Sharply, Shows Strength In Demand

The trade gap widened sharply in June though details point to strength in demand, not weakness. The nation's trade totaled $44.5 billion in June, higher than expectations which will bring down GDP revision estimates for what was already a very soft second quarter. The strength in the report, which is a negative in the calculation, is a rise in imports where capital goods and especially consumer were in heavy demand from U.S. buyers. Foreign demand for U.S. goods and services, however, was soft, showing only an incremental gain.

Country data are steady, showing a widening deficit with China to $29.8 billion and a narrowing with the EU to $12.9 billion. The gap with Japan widened to $5.9 billion while with Mexico it narrowed to $5.4 billion.

The gain in imports falls in line with the second-quarter strength of the consumer which has businesses looking for more goods. Foreign demand, however, is a concern for the economy, and a greater one of course after Brexit.

Recent History Of This Indicator:
The nation's trade deficit is expected to widen in June, to a consensus $43.0 billion vs May's $41.1 billion. Advanced data on June goods trade showed an increase in exports but a larger increase for imports, a mix that points to a larger deficit though increases in both point to rising cross-border demand.