July imports push deficit to $42 billion

WASHINGTON — The U.S. trade deficit grew slightly in July as exports fell at a slightly faster pace than imports.

The Commerce Department said Tuesday that the trade deficit widened to $42 billion, 0.2 percent higher than June's imbalance of $41.9 billion.

U.S. exports fell 1 percent to $183.3 billion, lowered by weaker sales of autos, telecommunications equipment and heavy machinery. Imports declined 0.8 percent to $225.3 billion — oil imports fell 6.5 percent.

A wider trade deficit acts as a drag on growth because the U.S. is typically spending more on imports while taking in less from the sales of American-made goods.

Weaker growth around the globe is hurting U.S. exports, even as oil imports decline sharply. Exports to Europe fell 11.7 percent as recessions in the region cut into demand.

Many countries in Europe are in recession. The region accounts for about one-fifth of U.S. exports.

The deficit with China grew 7.2 percent in July to $29.4 billion, the largest with any single country. That reflected a 5.6 percent jump in imports, which vastly outpaced a smaller 0.4 percent rise in U.S. exports.

China accounts for about 7 percent of U.S. exports and has the second largest economy in the world. Still, its economy has weakened this year and may be worsening. On Monday, China reported that its imports from the rest of the world shrank in August.

Exports fell in other big emerging economies. U.S. sales of goods to Brazil fell 4.4 percent, while exports to India dropped 1.2 percent.

The overall U.S. economy grew at an annual rate of just 1.7 percent in the April-June quarter, down from growth of 2 percent in the January-March period. Many economists believe growth will remain lackluster for the rest of the year, reflecting in part falling demand for U.S. exports.

American employers added just 96,000 jobs last month, down from an increase of 141,000 jobs in July and well below the average 226,000 jobs a month created from January through March. Manufacturing, which has been one of the few bright spots in this recovery, lost 15,000 jobs in August.

While the overall unemployment rate fell to 8.1 percent from 8.3 percent in July, the improvement came only because many people gave up looking for work and therefore were not counted in the government's calculations.

The weak unemployment report has lifted expectations that the Federal Reserve will approve more help for the U.S. economy at their meeting this week.