Trade Deficit Shrunk in June

The U.S. trade deficit unexpectedly fell in June as exports advanced to an all-time high, offsetting another big surge in oil imports.

The Commerce Department reported yesterday that the trade imbalance dropped to $56.8 billion in June, down by 4.1 percent from a revised May deficit of $59.2 billion. It was the smallest deficit in three months and much better than the $61.5 billion deficit Wall Street had been expecting.

Exports of goods and services rose to a record of $164.4 billion, helped by the dollar's declines earlier in the year, which have made U.S. goods cheaper on overseas markets.

Imports also rose to a record of $221.2 billion, up 1.8 percent from the May level. But the increase was driven by a 14.6 percent surge in petroleum imports, which hit an all-time high of $44.5 billion as crude oil prices jumped to record levels.

The country's trade deficit for goods other than petroleum shrank to the lowest level since February 2003. Demand for a variety of consumer products has weakened, reflecting the economic slowdown in the United States.

Through the first half of this year, the trade deficit is running at an annual rate of $702.8 billion, up slightly from last year's deficit of $700.3 billion.

Economists are worried that the big lift from exports could fade if economic growth in Europe and Japan, two big overseas markets for U.S. goods, falters.

The politically sensitive deficit with China rose to $21.4 billion in June, the largest monthly imbalance since a record $25.9 billion deficit in October. The deficit is likely to rise further. The Chinese reported Monday that their surplus with the world rose to the highest level in eight months in July.

The record level of U.S. exports in June reflected big increases in sales of such farm products as soybeans, corn and wheat, and gains in exports of manufactured goods. Sales of aircraft engines, electric generators and computer chips all posted big gains.

U.S. exports to Mexico, the European Union, and South and Central America all hit records in June.

But the U.S. deficit with OPEC set a record in June, as the average price of imported crude oil climbed to $117.13 per barrel. Oil prices, which hit a record on the spot market of $147.27 in early July, have fallen by about 20 percent, raising hopes that the oil portion of the trade deficit will start to narrow.