With the value of exports rising and the value of imports falling, the Commerce Department released a report on Thursday showing a notably narrower U.S. trade deficit in the month of July.
The report said the trade deficit narrowed to $41.9 billion in July from a revised $45.2 billion in June. The deficit was the smallest since February.
Economists had expected the deficit to narrow to $42.0 billion from the $43.8 billion originally reported for the previous month.
The narrower deficit was partly due to an increase in the value of exports, which rose 0.4 percent to $188.5 billion in July from $187.7 billion in June.
Exports of automotive vehicles, parts, and engines showed a significant increase, moving higher along with exports of industrial supplies and materials.
Meanwhile, the report also showed that the value imports tumbled 1.1 percent to $230.4 billion in July from $232.9 billion in June.
The sharp pullback in the value of imports was primarily due to a substantial decrease in imports of consumer goods.
Steve Murphy, U.S. Economist at Capital Economics, said the drop in consumer goods imports might be interpreted as a sign of weakness in domestic demand.
"But in this case we already know that retail sales were solid in July and motor vehicle sales increased further in August," Murphy said.
He added, "Instead, given that we also know manufacturing output increased sharply in July, it appears that the slowdown in inventory building is being achieved as much by a run down in imports as it is a slower pace of domestic production."
The Commerce Department also said the narrower trade deficit came as the goods deficit fell to $61.4 billion in July from $64.8 billion in June. The services surplus was nearly unchanged at $19.6 billion.
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