The July trade report showed the ripple effects of pandemic-era disruption as the United States and the rest of the world attempt to return to some semblance of normal, explained analysts at Wells Fargo.
Key Quotes:
“The U.S. trade deficit narrowed to $70.1 billion which, if sustained, would boost third quarter GDP growth. That said, the factors driving the narrowing have to do with long wait times at U.S. ports and the re-emergence of foreign travel in July, which may prove fleeting.”
“The reawakening of the global economy may be uneven as countries grapple with a re-emergence of COVID thanks to the Delta variant. However, through July, it was clear that rising demand helped with U.S. goods exports. Exports surged 1.3%, with every major category advancing during the month. Capital goods were noticeably strong, up 2.2% after two back-to-back monthly declines. Auto exports surged 5.3% while consumer goods exports were also up a solid 4.5%.”
“July's trade report suggests net exports could provide a modest boost to headline GDP in the third quarter. That said, it all depends on how trade evolves during the remaining two months of the quarter. Supply issues and capacity constraints continue to weigh on our visibility.”
“The recent resurgence of COVID has weighed on consumer sentiment, both domestically and abroad. Softer demand in conjunction with not being able to get hands on the products needed and rising prices of both product and transportation costs suggests we may be due for a bit of a soft-patch for trade the near term. That said, depleted inventory levels mean trade will continue, particularly as supply issues eventually begin to ease.”
