US July trade deficit swells to biggest since 2008

Washington

THE US trade deficit swelled to the widest in 12 years in July, with the surplus on services plunging to the lowest since 2012, pointing to a bumpy economic recovery ahead.

The overall gap of goods and services expanded to US$63.6 billion in July from a revised US$53.5 billion in June, according to Commerce Department data released on Thursday. The median estimate of economists surveyed by Bloomberg had called for a widening to US$58 billion. The positive balance on services declined for the first time in three months, dropping to US$17.4 billion.

Exports increased from the prior month by 8.1 per cent to US$168.1 billion, while imports gained 10.9 per cent to US$231.7 billion, the department said. Together, the value of US exports and imports rose to US$399.8 billion, still well below pre-pandemic levels.

The widening in the trade deficit in July after narrowing the prior month shows that the US' economic recovery will come in fits and starts. Trade volumes are higher than May's pandemic lows, but remain depressed following the initial uptick stemming from reopening measures.

The increase in imports of services outpaced the advance in exports, resulting in a lower surplus. Travel exports declined for a fifth straight month and are three-quarters smaller than a year earlier. Imports ranging from insurance and financial services to construction and travel rose, contributing to an overall increase to US$35.3 billion, the highest since February.

Another report showed the number of Americans filing new claims for unemployment benefits fell more than expected last week, but remained extraordinarily high amid signs that the labour market recovery was losing steam as the Covid-19 pandemic continues and government support lapses.

Initial claims for state unemployment benefits totalled a seasonally adjusted 881,000 for the week ended Aug 29, compared to 1.011 million in the prior week, the Labor Department said on Thursday. Economists polled by Reuters had forecast 950,000 applications in the latest week.

With last week's claims report, the Labor Department changed the methodology it used to address seasonal fluctuations in the data, which economists complained had become less reliable because of the economic shock caused by the coronavirus crisis.

The department said last Thursday it was switching to using additive factors to more accurately track seasonal fluctuations in the series. It said in the presence of a large shift in the claims series, the multiplicative seasonal adjustment factors, which it had been using, could result in systematic over- or under-adjustment of the data.

The labour market recovery from the depths of the pandemic in mid-March till April appears to be faltering. Though new Covid-19 infections have subsided after a broad resurgence through the summer, many hot spots remain. BLOOMBERG, REUTERS