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US June trade gap shrinks despite oil price surge

WASHINGTON - The U.S. trade deficit shrank unexpectedly in June, as the weak U.S. dollar helped push exports higher and overpowered record-high prices for imported oil, a Commerce Department report showed on Tuesday.

The trade gap totaled $56.8 billion, down from a revised estimate of $59.2 billion in May. The monthly tally was also much lower than the $61.5 billion midpoint estimate of analysts surveyed before the report.

Both exports and imports of goods and services set records in June, but exports rose by 4.0 percent compared to a 1.8 percent gain for imports.

The U.S. trade sector has been one of the bright spots for an economy struggling with a deep housing downturn and credit crunch. Trade contributed 2.4 percentage points to economic growth in the second quarter, which would have shrunk 0.5 percent without that support, according to preliminary estimates.

The June trade numbers are "slightly favorable for second-quarter GDP. Imports will be a little less of a drag on economic growth than appeared earlier. But weaker imports still reflect the overall weakness in the U.S. economy," said Gary Thayer, senior economist at Wachovia Securities in St. Louis.

The dollar rose against the euro on news the trade gap narrowed in June, while U.S. Treasury prices held steady at higher levels and stock futures were mostly flat.

The smaller-than-expected trade gap "will support growth going into the the third quarter," said Kurt Karl, chief U.S. economist at Swiss Re in New York.

But the narrowing of the trade deficit also is one more piece of evidence the U.S. economy is in a recession because it shows consumers are buying less, he said.

The deficit totaled $351.4 billion for the first six months of the year, down slightly from $358.4 billion in the same period in 2007.

In recent days, the dollar has surged to a six-month high against the euro, amid signs the U.S. economic slowdown is spreading to Europe and beyond.

But in June, the cheap greenback helped U.S. exports set records in several categories including overall goods, overall services, petroleum, food, feeds and beverages, industrial supplies and materials, capital goods and consumer goods.

U.S. exports to Mexico, the European Union and South and Central America also set records in June.

In contrast to the broad-based export rise, most of the import gain came from one area, petroleum, although imports of services also hit a record.

The monthly crude oil import bill was a record $34.9 billion, as the average price for imported oil jumped to a record $117.13 per barrel.

The month-to-month rise in oil prices of $10.85 per barrel was also a record, as were imports from Saudi Arabia and other members of the Organization of Petroleum Exporting Countries. The U.S. deficit with OPEC was a record $18.1 billion.

U.S. crude oil prices continued to rise sharply in July to a record above $147, but have retreated this week, with U.S. light sweet crude oil back below $115 on signs of weaker global demand and under pressure from the rising U.S. dollar.

The closely watched U.S. trade deficit with China rose 1.8 percent in June to $21.4 billion, and through the first six months of the year totaled $117.5 billion -- just fractionally higher than in the same period last year.