He explains that the figures aren’t as good as they look and it is just a matter of time before the deficit widens more significantly as the global slowdown takes a greater toll on US exports.
He continues to explain that, “July’s deficit of $42.0bn was better than the consensus forecast of $44.0bn. What’s more, June’s deficit was revised down to $41.9bn, from $42.9bn. But things would have been much worse if it wasn’t for a price-related fall in oil imports.”
When excluding petroleum, the deficit actually increased to $21.1bn from $19.4bln whilst in real terms, “it widened to $46.5bn from $44.0bn.”
Dales believes that, “The more recent rebound in oil prices means that in the coming months oil effects will push the deficit wider by around $4bn. What’s more, the 1.0% m/m decline in exports may be a sign that the global slowdown is hitting US producers.”
Overall, he sees that increase in the deficit will be a drag on overall GDP in the second Q of next year.