Amid higher trade activity, the advance report on the international trade balance for goods showed the deficit widened more than expected in July, to $91.2 billion from $88.8 billion in June, as import growth outpaced export growth.

Imports rebounded 1.9 percent in July after contracting 1.1 percent the previous month, supported by higher sales across the main categories, except for a 3.4 percent drop in industrial supplies. Consumer goods rose a further 4.1 percent after advancing 0.7 percent in June, indicating resilience in household demand. Auto imports were up 2.6 percent, capital goods 2.9 percent, and"other imports" 3.6 percent.

Activity also improved on the export front, with a 1.5 percent rebound on the month after a 0.1 percent contraction in June. The picture was more mixed, with"other goods" down 3.9 percent, capital goods down 0.5 percent, and foods, feeds and beverages down 0.7 percent. These declines were largely outweighed by gains elsewhere, led by a 10.3 percent recovery in autos after a 0.4 percent decrease in June. Consumer goods exports rose 0.4 percent and industrial supplies 2.3 percent.

The Federal Reserve will likely take note of the robust consumer goods imports that could point to stronger consumer demand than it might like. That being said, Econoday's Consensus Divergence Index, at minus 16, is pointing to an economy that is slightly underperforming.

The US goods deficit (Census basis) is expected to widen by $2.0 billion to $90.8 billion in July after narrowing by $2.8 billion in June to $88.8 billion.

This monthly report offers advance import and export data on the goods components of the monthly trade report. Goods make up roughly two-thirds of the nation's exports and roughly three-quarters of imports.

Note that data in the advance goods report are accounted for on a census basis and can differ slightly from subsequent data in the international trade report where goods data are accounted for on a balance of payment basis to adjust for changes in cross-border ownership.

Changes in the levels of imports and exports, along with the difference between the two (the trade balance), are valuable gauges of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect the value of the dollar in the foreign exchange market.

Imports indicate demand for foreign goods here in the United States. Exports show foreign demand for U.S. goods. The dollar can be particularly sensitive to changes in the chronic trade deficit run by the United States, since this trade imbalance creates greater demand for foreign currencies.

Market reaction to this report is complex. Typically, the smaller the trade deficit, the more bullish it is for the dollar. Also, stronger exports are bullish for corporate earnings and the stock market. Like most economic indicators, the trade balance is subject to substantial monthly variability, especially when oil prices change.

It is also useful to examine the trend growth rates for exports and imports separately because they can deviate significantly. Trends in export activity reflect both the competitive position of American industry and the strength of domestic and foreign economic activity. U.S. exports will grow when: 1) U.S. product prices are lower than foreign product prices; 2) the value of the dollar is relatively weaker than that of foreign currencies; 3) foreign economies are growing rapidly.

Imports will increase when: 1) foreign product prices are lower than prices of domestically-produced goods; 2) the value of the dollar is stronger than that of other currencies; 3) domestic demand for goods and services is robust.