Soft Month In June For US Trade

June was a very soft month for US trade and though the month's headline does show marginal improvement from May, at an adjusted deficit of $55.2 billion versus $55.5 billion, both imports and exports contracted, down a monthly 1.7 percent and 2.1 percent respectively.

And not only did goods exports fall, down 2.8 percent to $137.1 billion, but services exports which are usually solid also fell, down 0.7 percent in the month to $69.2 billion. Imports of goods fell 2.2 percent to $212.3 billion with imports of services up 0.2 percent to $49.2 billion.

Turning to details on goods, the deficit with China in June was $30.0 billion versus May's $31.2 billion in country data that may be unadjusted but are still indicative of a deep and persistent bilateral deficit. The deficit with Mexico also remains very deep, at $9.9 billion from May's $9.6 billion.

By categories, exports of consumer goods were the weakest posting a $1.9 billion monthly decline in adjusted data to $16.2 billion with exports of capital goods, despite a welcome rise of $0.6 billion in civilian aircraft exports, down $1.2 billion. Exports of agricultural products rose slightly in the month to $12.1 billion. On the import side, oil price effects made for a $3.2 billion decline in industrial supplies though consumer goods, the heaviest category for imports, fell $0.9 billion to a still steep $54.7 billion.

June's trade report edges the trade debate deeper on the troubled side, but only slightly. Yet if the pattern continues and both exports and imports contract, the Federal Reserve's concerns over the effects of slowing global trade, expressed by this week's rate cut, will look more and more justified.