Trade Gap Shrinks in August, Helped By Lower Oil Prices

Lower oil prices helped the trade gap shrink in August. The trade deficit in August narrowed to $40.1 billion from $40.0 billion in July,

Exports advanced 0.2 percent in August, following a 0.9 percent jump in July. Imports edged up 0.1 percent, following a 0.6 percent gain in July.

The petroleum balance shrank to $13.1 billion from $14.5 billion in July. The services surplus expanded to $19.8 billion from $19.5 billion. However, the goods excluding petroleum gap increased to $45.1 billion from $44.3 billion in July.

On a not seasonally adjusted basis, the August numbers showed surpluses, in billions of dollars, with Hong Kong $2.8 ($2.1 for July), Australia $1.4 ($1.6), Singapore $1.0 ($0.9), and Brazil $1.0 ($0.5), among others. Deficits were recorded, in billions of dollars, with China $30.2 ($30.9), European Union $11.0 ($13.2), Germany $7.1 ($6.4), Japan $4.7 ($6.2), OPEC $3.2 ($6.2), and Canada $2.3 ($3.0) , among others.

Overall, the August report is favorable. Lower oil prices mean more discretionary income for consumers. Demand is moving forward with non-oil imports up.

Recent History Of This Indicator:
The U.S. international trade gap in July shrank marginally to $40.5 billion from $40.8 billion in June. Exports rose 0.9 percent in July after no change the month before. Imports gained 0.7 percent, following a 1.1 percent drop in June. The goods excluding petroleum gap decreased to $44.7 billion from $45.0 billion in June. Also the petroleum balance contracted to $14.5 billion in July from $14.7 billion the prior month. The services surplus was essentially unchanged at $19.6 billion. Import news can at times provide insight into domestic demand. This appears to be the case with July data. Domestic demand may be stronger than earlier believed. According to the Commerce Department, the July gap with China was a record. This could suggest an improvement in business sentiment for U.S. consumer demand in coming months-notably the holiday season.