Imports And Exports Drop Sharply

Exports fell a very sharp 2.7 percent in June with imports down 2.2 percent. These are among the weakest results in 2-1/2 years and outside of isolated gains in May, extend six months of deterioration consistent with slowing and/or contraction in net global trade. The more severe contraction in exports (totaling $136.3 billion) than imports ($210.5 billion) makes for a deeper-than-expected $74.2 billion goods gap in June which just exceeds Econoday's consensus range and will have forecasters marking down their net export estimates for tomorrow's second-quarter GDP report.

Capital goods are the US's strongest exports and these fell 2.6 percent in the month with consumer goods down 10.9 percent and autos down 4.0 percent. Exports of foods, however, rose 0.5 percent though this year-on-year rate is in the deepest negative ground of any export category, at minus 5.5 percent.

Import contraction was deepest in industrial supplies in June which points to the effects of lower oil prices. But imports of consumer goods and also vehicles were also down, 1.7 and 1.9 percent respectively which hints at more fundamental weakness. Imports of food fell 0.7 percent in the month.

Total exports on the year are down 3.7 percent with imports up but only marginally at 0.2 percent. Facing a sudden rush of improving economic data -- whether employment or retail sales or core capital goods -- the Federal Reserve will be able to point to declines in global trade as a justification for what appears to be an approaching rate cut at next week's meeting.