US trade gap shrinks in June for 3rd straight month

The US trade deficit narrowed in June for the third straight month, with a slight rise in exports adding to a drop in imports to cut the shortfall, the Department of Commerce said Thursday. Analysts called the data on balance positive, but the politically sensitive trade shortfall with China continued to grow, despite efforts by US leaders to bring it under control. The country's trade gap for the month was $42.9 billion, the smallest deficit since December 2010, when total trade was 10 percent less. Exports continued their steady climb, rising to $185.0 billion. The three month moving average for exports, at $183.7 billion, was 5.1 percent above the average of a year earlier of $174.7 billion. Imports were $227.9 billion; the three month average of $230.9 billion was up 4.1 percent from a year earlier. The rise in exports came on the back of strengthening shipments of capital goods and industrial supplies. The fall in imports was related to a sharp downturn in industrial supply purchases from abroad. But the sensitive trade relationship with China did not improve in June or in the first six months of the year. Exports to China fell and imports rose from May to June, and the bilateral trade deficit for the January-June period grew 8.7 percent over to the first six months of 2011. Analysts saw a mixed but mostly positive message in the numbers. "The drop in imports brought a rather negative signal: it was driven by a decline in import of industrial supplies and capital goods suggesting another weakening in internal demand," said Clementine Cazalets of Natixis. "However, the rise in exports for almost all components is an encouraging sign for the world business activity." "Looking forward, we expect the foreign trade to contribute slightly negatively to growth in the coming quarters as the world business activity (mostly due to the recession in Europe) should remain sluggish while the US domestic demand is likely to pick up slightly."