WASHINGTON (Reuters) - The U.S. trade gap grew slightly in July as Europe’s economic travails hit exports.
But a drop in oil prices cut the import bill, and helped bring the trade deficit in below economists’ expectations.
The shortfall in trade edged up to $42 billion from $41.9 billion in June, the U.S. Commerce Department said on Tuesday. Economists had expected a deficit of around $44 billion.
Exports to the 27 nations of the European Union fell 11.7 percent in July, with exports to Germany the lowest since February 2010. The drop-off in exports helped push the U.S. trade gap with the EU to its widest point since October 2007.
The United States also shipped fewer goods to other top export markets such as Canada, Japan and Latin America.
“The global volume of trade is slowing because of the weakening global economy. But the ripples in the U.S. have not been too severe, so it’s not a growth stopper at all,” said Pierre Ellis, senior global economist at Decision Economics in New York.
The data left forecasts for third-quarter U.S. economic growth largely intact. Economists expect the economy to strengthen only slightly after growing at a subdued 1.7 percent annual rate in the second quarter.
But it offered a reminder of the toll being exacted by the debt crisis in the euro zone, which looks headed toward recession.
“We should not underestimate the negative impact from the European crisis to the whole world,” International Monetary Fund Deputy Managing Director Zhu Min told an audience of business leaders in Tianjin, China.
The U.S. trade deficit could widen in coming months, following a rebound in oil prices, strengthening consumer demand and a strong dollar that will cut into exports, analysts said.
That would weigh on the already sluggish U.S. recovery.
The Federal Reserve’s policy-setting group meets on Wednesday and Thursday and many analysts believe it will launch a third round of bond buying to keep borrowing costs low and try to drive the 8.1 percent U.S. unemployment rate lower.
The high jobless rate and spotty recovery have posed a hurdle to President Barack Obama’s re-election bid, though the latest opinion surveys give Obama an edge over Republican challenger Mitt Romney as the November polls approach.
In a troubling economic sign, the number of U.S. job openings dropped to 3.66 million in July from 3.72 million in June, the Labor Department said.
However, a third report showed U.S. small business sentiment rose in August for the first time in four months as more owners anticipated business improving after the November 6 election.
“Looking past the election and year end, (small business) owners became a bit more optimistic about improvements in real sales volumes and business conditions,” the National Federation of Independent Business said.
U.S. stocks edged higher as traders focused on the Fed and developments in Europe, while prices for U.S. Treasuries slipped and the dollar slid against most major currencies.
The trade report showed that U.S. exports totaled $183.3 billion in July, down 1 percent from a record high in June.
However, U.S. exports of food, feeds and beverages, helped by high crop prices, hit an all-time high.
Imports fell 0.8 percent in July to $225.3 billion, with a drop in world oil prices helping to cut the tally.
The average price for imported oil was $93.83 per barrel, the lowest since March 2011. Imports of oil and other industrial supplies and materials were the lowest since late 2010.
Meanwhile, imports from China hit a record high $37.9 billion, pushing the U.S. trade deficit with China to a record high $29.4 billion.
U.S. exports to China, which has been one of the fastest-growing markets for U.S. goods, increased only 0.4 percent to $8.6 billion.
Additional reporting by Richard Leong in New York; Editing by Andrea Ricci and Tim Ahmann