The US trade deficit widened to a two-year high in July, fuelled by a surge in imports of goods and partly reflecting stepped-up efforts by companies to ensure adequate supply ahead of a potential dockworkers’ strike.

The goods and services trade gap grew 7.9% from the prior month to US$78.8 billion , Commerce Department data showed on Wednesday. The figure was in line with the median estimate in a Bloomberg survey of economists. 

The value of goods and services imports increased 2.1% to the highest level since March 2022. Exports rose 0.5%. The figures aren’t adjusted for inflation.

The July shortfall suggests trade will again weigh on gross domestic product after subtracting the most since the start of 2022 in the second quarter. A pickup in merchandise imports shows the scramble by US companies to stock up ahead of a possible work stoppage by East and Gulf Coast dockworkers at the end of this month.

Moreover, retailers are in the process of stocking up for the holiday-shopping season. That’s led to a surge in maritime traffic into the West Coast. The ports of Los Angeles and Long Beach, which account for roughly a third of all US container imports, had their third-strongest month ever in July, just shy of an all-time high reached in May 2021.

On an inflation-adjusted basis, the merchandise trade deficit widened to US$97.6 billion in July - also the largest since June 2022. Prior to the latest results, the Federal Reserve Bank of Atlanta’s GDPNow forecast showed trade subtracting 0.35 percentage point from third-quarter growth.

The increase in merchandise imports to the highest since June 2022 was broad and included increases in inbound shipments of industrial products, capital goods and consumer merchandise. The total value of exports was restrained by a decline in motor vehicle shipments.

  - Bloomberg