The U.S. trade deficit increased to its largest in over two years in the month of July, according to a report released by the Commerce Department on Wednesday.
The Commerce Department said the trade deficit widened to $78.8 billion in July from a revised $73.0 billion in June.
Economists had expected the trade deficit to climb to $79.0 billion from the $73.1 billion originally reported for the previous month.
While slightly narrower than expected, the trade deficit in July marked the largest gap since the deficit reached $81.2 billion in June 2022.
Trade data is volatile, and we expect some narrowing in the deficit over the rest of the quarter, but this will still leave net trade on pace to drag 0.4ppts from Q3 GDP growth, said Matthew Martin, U.S. Economist at Oxford Economics.
The increase in the size of the trade deficit came as the value of imports surged by 2.1 percent to $345.4 billion in July after climbing by 0.7 percent to $338.3 billion in June.
Imports of capital goods, including computer accessories, saw a significant increase along with imports of industrial supplies and materials.
Meanwhile, the value of exports rose by 0.5 percent to $266.6 billion in July after jumping by 1.7 percent to $265.3 billion in June.
A notable increase in exports of semiconductors along with an uptick in exports of services were offset by decreases in exports of passenger cars and gem diamonds.
The report also said the goods deficit widened to $103.1 billion in July from $97.5 billion in June, while the services surplus shrank to $24.3 billion in July from $24.5 billion in June.