International Trade:  Positive Start for 3Q GDP, Volatility To Come

Bottom Line: The trade deficit widened only slightly in July, less than expected, as both exports and imports fell. The July level for real trade balance for goods is modestly below its Q2 levels, suggesting 3Q GDP started with a positive contribution from trade. These data were not impacted by Hurricane Harvey, which likely had a significant impact on trade in August, mainly via energy imports and exports, and will create volatility in 3Q GDP calculations. The International Trade Deficit WIDENED by $0.2 billion to $43.7 billion in July, compared with market expectations for an increase to a $44.7 billion deficit. For the first 7 months of the year, the trade deficit has averaged $45.6 billion, modestly above from the average of $41.6 billion for the same period in 2016. Exports FELL by 0.3% to $194.4 billion after an increase of 1.4% in the prior month. The declines in consumer goods and motor vehicles and parts were partially offset by increases in capital goods and food, feed, and beverages. Export growth is now 4.9% ABOVE their year ago level. Imports FELL 0.2% to $238.1 billion after a decline of 0.1% in the prior month. The declines in motor vehicles and parts and industrial supplies and materials were partially offset by increases in capital goods and food, feed, and beverages. In July, oil imports decreased. Oil imports 2017 year-to-date levels are now moderately below the 2016 year-to-date levels. Imports are now 5.1% ABOVE their year ago level.