WASHINGTON (AP) — The U.S. trade deficit fell to its lowest level in 18 months in June, pushed down by a steep drop in oil imports and a small rise in exports.
The trade gap narrowed to $42.9 billion in June, down from $48 billion in May, the Commerce Department said Thursday. The price of imported oil fell $7.78 to $100.13 a barrel, the steepest drop in 3 ½ years. That helped lower the trade deficit in oil to its lowest level since November 2010.
Exports rose 0.9 percent to a record high of $185 billion. Overseas sales of autos, pharmaceuticals, and industrial machinery increased. Despite Europe’s struggling economy, exports to the 27-nation European Union increased 1.7 percent.
Imports fell 1.5 percent to $227.9 billion, the lowest in four months.
A narrower trade gap acts as less of a drag on growth because it means the United States is spending less on foreign-made products and is taking in more from sales of U.S.-made goods.
The department said late last month that the economy expanded at a 1.5 percent annual rate in the April-June quarter. The department used an estimate of the June trade deficit to calculate that number. The sharp drop in the deficit could mean the economy actually grew at a faster pace. The department will update its estimate of second-quarter growth later this month.
Economists are worried that slower overseas growth will reduce demand for U.S. exports. About one-fifth of U.S. exports go to Europe, which is in the third year of a financial crisis.
So far, that hasn’t happened. Exports are up 5.9 percent in the first six months of this year compared to last year.
Higher exports helped cut the trade deficit with the European Union by 20.1 percent to $8.4 billion. The politically-sensitive trade deficit with China worsened, rising 5.2 percent to $27.4 billion.
U.S. sales to China fell, possibly because that country’s growth is slowing. Exports to China dropped 4.3 percent to $8.5 billion.
Exports may fade in the coming months. A private trade group said last week that its survey of manufacturers found that export orders fell in July to their lowest level in more than three years.
U.S. growth is too sluggish to support much hiring. Employers have added an average of 150,000 jobs per month this year, about the same as in 2011. That hasn’t been enough to lower the unemployment rate, which was 8.3 percent in July.