by Calculated Risk on 9/12/2006 10:36:00 AM

Update: Dr. Setser on trade deficit: Not quite so bright after all

The trade deficit (ex-oil) was thought to be on a downward trajectory.

But after today’s data, that argument may need to be reconsidered.
...
My bottom line: reducing the trade deficit is going to be – barring a big fall in the price of oil – something of a slog. Import growth has to slow. And I suspect that global growth won’t be quite as strong as it has been, making it hard to sustain the very strong export growth the US has enjoyed recently.

Original Post:

The Census Bureau announced the U.S. trade deficit for July was $68.0 Billion. From MarketWatch: Oil imports lead to record trade gap in July

Higher prices for imported oil pushed the U.S. trade gap of goods and services to a new record in July, a government report showed Tuesday.

The nation's trade deficit widened by 5% in July to $68 billion, the Commerce Department said. This beats the previous record of $66.6 billion set last October. Read full government report.

The U.S. imported $20.8 billion worth of crude oil in July, the highest amount on record. The import average price per barrel of crude oil was a record $64.84 in the month.

Click on graph for larger image.

It appears the trade deficit, excluding petroleum, might have stabilized (red). This might indicate a slowing U.S. economy and is consistent with a slowdown in the U.S. housing market.

The increase in petroleum prices was expected for July. However the decrease in exports was unexpected:

Meanwhile, exports of goods alone fell 1.5% in July to $73.4 billion. The drop was led by capital goods.

Still July is the second best month of goods exports ever, and exports of goods are up 14% YTD through July compared to 2005. As the U.S. economy slows, foreign demand for U.S. goods is important for global rebalancing.