A jump in international travel helped lower the US trade deficit in July

US trade deficit narrows sharply in July due to lower imports

A surge in international travel helped narrow the US trade deficit in July – Copyright AFP/File JULIEN DE ROSA

A sharp fall in imports, especially consumer goods, cut the US trade deficit in July to its lowest level since October, the government said on Wednesday.

Exports rose only marginally, helped by increased international travel, but the gain was enough to set another record, the Commerce Department said.

The report said the overall trade deficit narrowed by more than $10 billion to $70.6 billion from June, almost entirely due to reduced imports.

Companies have rushed to replenish depleted inventories in recent months amid strong demand from US buyers, but skyrocketing inflation has fueled fears that consumers will back off, causing firms to become more cautious.

The Federal Reserve is raising interest rates aggressively to dampen demand and bring down inflation, and many families have to spend the bulk of their income on essentials.

Higher interest rates have strengthened the US dollar, making US goods relatively more expensive, which could lead to lower exports, but for now the data is likely to boost growth in the world’s largest economy.

Exports of goods and services reached $259.3 billion, just enough to break the record set in June, according to the report.

Imports fell $8.5 billion, including $3 billion in pharmaceuticals and $1.8 billion in industrial supplies, including crude oil, while auto imports jumped $1.8 billion.

Exports are likely to boost economic growth again in the third quarter, said Rubila Farooqi of High Frequency Economics.

But she warned that “a strong dollar clouding global growth prospects and slowing domestic demand should have implications for future trade flows.”

The data showed that the US deficit with China narrowed from $3.9 billion to $33.0 billion in July, mainly due to falling imports.

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