U.S. Trade Deficit Unexpectedly Narrows To $40.5 Billion In July

(RTTNews) - Reflecting moderate increases in the value of both imports and exports, the Commerce Department released a report on Thursday showing that the U.S. trade deficit unexpectedly came in slightly narrower in the month of July.

The Commerce Department said the U.S. trade deficit narrowed to $40.5 billion in July from a revised $40.8 billion in June.

Economists had expected the deficit to widen to $42.3 billion from the $41.5 billion originally reported for the previous month.

The unexpectedly narrower trade deficit came as the value of exports increased at a slightly faster rate than the value of imports.

The report said the value of exports climbed 0.9 percent to $198.0 billion in July, while the value of imports rose 0.7 percent to $238.6 billion.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said the narrower deficit "supports our view that net external trade will make a modest positive contribution to third-quarter GDP growth, which should be at least 3% at an annualized pace."

"Overall, the decline in the trade deficit is encouraging and echoes what the activity surveys are telling us, namely that economic growth remains strong," he added.

The Commerce Department noted that the goods deficit narrowed to $60.2 billion in July from $60.4 billion in June, while the services surplus was virtually unchanged at $19.6 billion.

Meanwhile, the report also showed that the U.S. trade deficit with China widened to $30.9 billion in July from $30.1 billion in the previous month.