Star Metro - US trade gap drops sharply in July on lower imports

Exports rose only slightly, boosted by an increase in international travel, but the gain was enough to set yet another record, the Commerce Department reported.

The overall trade deficit fell by more than $10 billion to $70.6 billion compared to June, almost entirely due to the decline in imports, the report said.

Companies in recent months rushed to replenish depleted inventories amid strong demand from American shoppers -- but sky-high inflation has raised concerns that consumers will pull back, causing firms to become more cautious.

The Federal Reserve is raising interest rates aggressively to dampen demand and cool inflation, and many families are having to spend a greater share of their incomes on staple goods.

Higher interest rates have strengthened the US dollar, making American goods relatively more expensive, which could trim exports, but so far the data are likely to boost growth in the world's largest economy.

Goods and services exports edged up to $259.3 billion, just enough to beat the record set in June, according to the report.

Imports fell $8.5 billion, including a $3 billion plunge in pharmaceuticals, and $1.8 billion drop in industrial supplies including crude oil, while auto imports jumped $1.8 billion.

Exports are likely to again contribute to economic growth in the third quarter, said Rubeela Farooqi of High Frequency Economics.

But she cautioned "a strong dollar, dimming global growth prospects, and slowing domestic demand should have implications for trade flows going forward."

The US deficit with China decreased $3.9 billion to $33.0 billion in July due largely to falling imports, the data showed.

O.Lessard--SMC