The U.S. trade deficit in July posted its biggest drop in nearly two and a half years, as exports surged to a record high and retreating oil prices cut into imports.
Separately, the number of people claiming new jobless benefits rose last week, providing another sign of labour-market weakness just before President Obama intends to lay out a plan to spur job growth.
The U.S. deficit in international trade of goods and services contracted 13.1% to $44.81 billion U.S. from a downwardly revised $51.57 billion U.S. the month before, the Commerce Department said Thursday.
The June trade gap was still the highest in two and a half years, though it is below the initial estimate of $53.07 billion U.S.
Economists surveyed by Dow Jones Newswires had expected the gap to narrow to $51.0 billion U.S.
The sharp narrowing in the July trade gap -- its biggest contraction since February 2009 -- came as oil prices have pulled back from nearly three-year highs reached in May. Nymex crude futures have recently settled below $90 U.S. a barrel amid concerns about the global economic slowdown, from highs around $115 U.S. a barrel.
The U.S. bill for crude oil imports in July fell to $29.31 billion U.S. from $31.45 billion U.S. the month before, as the average price per barrel was reduced by $1.73 to $104.27 U.S. Crude import volumes fell to 281.1 million barrels from 296.7 million. The U.S. paid $37.17 billion U.S. for all types of energy-related imports, down from $39.38 billion U.S. in June.
However, the trade deficit with China expanded to its highest level since last September despite rising exports, rising 1.1% to $26.96 billion U.S. in July. Exports to the U.S.'s number-two trading partner grew 5.7% to $8.17 billion U.S., while imports increased 2.1% to $35.13 billion U.S.
A recent strengthening in the value of the yuan against the dollar hasn't quieted critics of China's tightly managed currency policy, which they view as providing an unfair trade advantage. House Democrats plan to press for a vote on a bill to punish China for keeping the yuan undervalued.
Amid concerns that the global recovery could stall, a senior U.S. Treasury official Wednesday urged Beijing to pick up the pace of its yuan appreciation to help spur growth.
While rising exports provided support to the U.S. recovery early on, trade has become more of a drag on the economy in recent quarters. Revisions to second-quarter growth showed trade accounted for less than 0.1 percentage point of the meager 1.0% gain in gross domestic product, after subtracting from GDP during the first three months of the year.
Thursday's report showed that the real, or inflation-adjusted deficit, which economists use to measure the impact of trade on GDP, fell to $45.28 billion in July from $50.31 billion U.S. the month before.
Not accounting for inflation, U.S. exports grew 3.6% to $178.04 billion U.S., while imports slipped 0.2% to $222.84 billion U.S.
Exports of vehicles and auto parts jumped $1.26 billion U.S. to a new high of $12.09 billion U.S. in July, while sales abroad of capital goods also hit a record. Capital goods exports rose $2.21 billion U.S. to $42.09 billion U.S. , with gains in telecom equipment and planes.
Breaking down imports outside of petroleum products, purchases of capital goods reached a record $43.26 billion U.S. , gaining $276 million U.S. Auto and related parts imports increased $2.91 billion U.S.
Meanwhile, the deficit with other major trading partners were mixed. The U.S. gap with Mexico contracted by 23.4% to $4.90 billion U.S., and the deficit with the euro area fell by 13.4% to $7.72 billion U.S.
But the trade gap with Japan grew by 30.0% to $5.25 billion U.S. and the shortfall with Canada expanded by 14.3% to $3.21 billion U.S.
