In July, the US trade deficit reached its highest level in two years, driven by a notable rise in imports partly due to companies' efforts to stockpile goods ahead of a potential dockworkers strike.
The trade gap for goods and services expanded by 7.9% from the previous month to $78.8 billion, according to data released by the Commerce Department on Wednesday. This figure aligned with the median forecast in a Bloomberg economist survey.
Imports of goods and services climbed 2.1%, reaching their highest level since March 2022, while exports saw a modest increase of 0.5%. These figures are not adjusted for inflation.
The deficit in July indicates that trade may once again impact GDP, following a substantial reduction in the second quarter, the largest since early 2022. The increase in merchandise imports reflects US companies’ efforts to prepare for a potential strike by dockworkers on the East and Gulf Coasts at the end of the month.
Additionally, retailers are building up inventory for the upcoming holiday season, leading to a surge in maritime traffic to the West Coast. Ports such as Los Angeles and Long Beach, which handle about a third of all US container imports, experienced their third-highest traffic month ever in July, just short of the peak reached in May 2021.
When adjusted for inflation, the merchandise trade deficit grew to $97.6 billion in July, the largest since June 2022. The Federal Reserve Bank of Atlanta’s GDPNow forecast had previously indicated that trade would reduce third-quarter growth by 0.35 percentage points.
The rise in merchandise imports, the highest since June 2022, was widespread, including increases in industrial products, capital goods, and consumer goods. However, the overall value of exports was limited by a decrease in motor vehicle shipments.
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