Trade deficit widens 7% in June as imports jump

August 06 01:45 2015

The U.S. trade deficit increased in June as solid consumer spending pulled in more imports, while the strong dollar restrained exports. The Commerce Department said Wednesday the trade gap jumped 7% to $43.8 billion in June, up from $40.9 billion in May. Imports increased 1.2% to $232.4 billion, while exports edged lower to $188.6 billion from $188.7 billion. U.S. manufacturers have been held back this year by the strong dollar, which makes their products more expensive overseas.AP CURRENT ACCOUNT F USA NJ

Exports of large capital equipment, including telecommunications gear and industrial machinery, fell 1.7% in June. Imports of food, auto parts, and consumer goods such as pharmaceuticals and cellphones surged as Americans spent more. Even so, the deficit narrowed in the second quarter compared with the first, boosting the economy. Trade has been volatile this year. Labor disputes at West Coast ports in the first quarter delayed imports and the shipment of U.S. goods overseas. That lowered exports and pushed the deficit to a three-year high in March of $50.6 billion.

International trade subtracted about 2 percentage points from growth in the January-March quarter, when the economy expanded at an anemic annual rate of just 0.6%. It then added 0.1 percentage point in the April-June quarter, when growth picked up to a 2.3% pace. The dollar has risen about 14% in value against overseas currencies in the past year. That also makes foreign products cheaper in the U.S. Greater consumer spending may also be pushing up imports. Steady hiring has given nearly 3 million more Americans paychecks in the past year, boosting their purchasing power. Consumer spending increased 2.9% up in the April-June quarter after rising only 1.8% in the first three months of the year.

The politically-sensitive trade gap with China narrowed to $28.9 billion from $30.6 billion in May, though it remains by far the largest with any single country. The deficits with Germany, France and the U.K. widened. The U.S. went from a small trade surplus with Canada in May to a deficit of $3.1 billion in June. Separately, President Barack Obama says a trade deal in the works with 11 other Pacific Rim nations will open more markets for U.S. goods and boost the U.S. economy.