August 4, 2017 – The International Trade Balance looks at the U.S. Economy’s transactions with trading partners around the world for goods, services, income, and financial claims on liabilities. It is the major indicator for foreign trade and has implications for the net exports portion of GDP. A positive trade balance represents more exports than imports while the opposite is true for a negative balance.
The trade deficit in June dropped to 43.6 billion, from May’s revised deficit of 47.4 billion (+0.1 billion revision). The deficit came in below the consensus of 44.4 billion. Exports rose 1.3% to 194.4 billion while imports came in 0.2% lower to 238.0 billion. Year to date the deficit for goods and services increased 10.7% compared to last year.
The decrease in the June trade deficit shows the demand for foreign goods decreasing and the demand for U.S. goods getting stronger. A large increase in exports is a benefit to the economy in lowering the trade deficit but a large increase in exports to a particular country can show economic strength in that country leading to investment opportunities. The U.S. Dollar Index (DXY) dropped from 97.20 to 95.63 in June (-1.6%). A weaker U.S. dollar makes importing goods relatively more expensive and cheaper for foreign countries to buy U.S. goods. This strengthening trade balance is a positive sign for stronger GDP growth in the second quarter.