The US trade deficit widened to a record high in June, showing strong pre-delta demand

The trade report is another example of how U.S. consumers and businesses have stepped up spending and investing as the economy regains its pre-Covid-19 size, fueling demand for imports. Foreign purchases climbed 2.1% in June to $ 283.4 billion, also a monthly record.

Exports grew more slowly, reflecting weaker recoveries in some other regions that made less progress against Covid-19. Exports rose only 0.6% in June to reach $ 207.7 billion.

The business data and separate readings of the labor market come as the economic recovery faces the risks of the Delta variant, supply chain constraints and a shortage of available workers.

Unemployment claims in the United States, an indicator of layoffs, edged down to 385,000 last week, a Labor Department report said Thursday. New deposits have settled this summer at a level that is nearly double the pre-pandemic average but well below the start of the pandemic.

So far, business and government responses to the Delta variant have not triggered an increase in layoffs in the United States, according to the Department of Labor report. The US economy has seen robust growth this year with vaccine availability, business reopening, pent-up consumer demand and government assistance. Economists say the Delta variant poses a risk, however, if it causes widespread disruption.

The June trade report covered a period before the Delta variant began to spread in the United States At the end of June, Covid-19 cases were still very low, but the re-emergence of the virus cast a shadow over the economic outlook more wide.

The rise of the Delta variant highlights a fault line that has arisen in the global economy between advanced economies with high vaccination rates and emerging markets where rates are lagging.

The International Monetary Fund last week raised its growth forecasts for the United States and other advanced economies while lowering the outlook for emerging countries, particularly in Asia. No matter how hard the Delta variant hits the United States, it will likely hit unvaccinated countries the hardest.

The momentum has helped widen the US trade deficit to unprecedented levels this year as the US economy continues to attract more goods from abroad. Several rounds of government stimulus payments have also left Americans with plenty of money to spend, while weakened trading partners restrict purchases of American goods and services.

The pre-pandemic monthly deficit record came in August 2006, with a deficit of $ 68 billion, at a time when US demand for high-priced oil was the primary driver of the deficit.

The increase in imports in June was driven by purchases of industrial supplies, steel products, organic chemicals and non-monetary gold, which includes gold for industrial use, the Commerce Department report said on Thursday. .

Separate reports showed manufacturers had a good June, with the Federal Reserve’s industrial production index hitting its highest level since the 2020 pandemic. The Institute for Supply Management’s monthly report on manufacturing , released on Monday, said new orders for manufacturers have been strong, suggesting that the sector’s strength continued through the summer.

Imports of consumer goods edged down in June, mainly due to lower imports of pharmaceuticals.

The emergence of the Delta variant and the shift from consumer goods to services, which are mostly produced domestically, has led some economists to predict that the deficit could start to shrink.

“June’s record trade deficit could be the peak of the year,” said Bill Adams, senior economist at PNC Bank. “Spending on services in the United States has grown faster than spending on goods in recent months as people have become more comfortable venturing out of the home.”

Another challenge for international trade: Although US demand has been strong, global manufacturers have faced many challenges filling orders across their supply chains. The pandemic, factory closures and abrupt changes in purchasing habits have resulted in persistent shortages of essential items, leading to manufacturing delays.

A severe semiconductor shortage has slowed production of everything from computers to home appliances to automobiles. Many companies have found themselves caught between growing consumer demand on one side and shortages in their supply chain on the other.

Subaru Corp.

CFO Katsuyuki Mizuma said U.S. dealers are desperate to order more imported vehicles to fill an inventory shortage. Almost all of the major automakers such as Subaru have seen their production slowed down by the global chip shortage.

“As soon as the ship hits shore, they sell right away,” he said.

—Bryan Mena contributed to this report.

Write to Josh Zumbrun at [email protected]