The trade deficit in the US probably shrank in June as cheaper oil reduced the import bill and slower global growth led to reduced demand for American-made goods, economists said before a report this week.
The gap narrowed to $47.5 billion, the smallest in four months, from $48.7 billion in May, according to the median forecast of 59 economists surveyed by Bloomberg News before the Commerce Department issues the data on August 9. Another report may show worker productivity rose and labour costs eased in the second quarter.
Slowing economies in Europe and Asia means customers overseas may cut orders to American manufacturers, depriving the expansion of one of its mainstays. In the US, unemployment that’s exceeded eight per cent for 42 straight months may prompt consumers to slow purchases of goods made abroad.
“Trade had definitely made an outsized contribution thus far in the economic cycle, but that phase is rapidly drawing to a close,” said Carl Riccadonna, a senior US economist at Deutsche Bank Securities in New York. “Global trade has been slowing. Imports are not booming by any stretch.” Slower global economies help explain why shares of equipment makers have lagged behind the broader market. The Standard & Poor’s Supercomposite Machinery Index, which includes companies like Eaton and Deere & Co, whas gained 3.5 per cent this year while the S&P 500 index has risen 11 per cent.
The cost of all imported goods rose 0.1 per cent in July after falling 2.7 per cent the prior month, economists surveyed projected a Labour Department report on August 10 will show.
Imports may be limited as the US labour market continues to struggle. The jobless rate unexpectedly rose to 8.3 per cent in July from 8.2 a month earlier, Labour Department figures showed August 3. A 163,000 gain in payrolls followed a 64,000 increase in June.