The US trade deficit contracted sharply in July, posting its biggest drop in 17 months as exports of aircraft jumped and US demand for imports fell across the board.

The deficit in international trade of goods and services narrowed by 14% to $42.78bn from a downwardly revised $49.76bn the month before. U.S. exports expanded 1.8%, the highest level since August 2008. Imports registered their biggest decline since February of last year, falling 2.1%.

• The increase in goods exports was mostly accounted for by an increase in capital goods.

• Services exports were virtually unchanged as decreases in other private services (which includes items such as business, professional, and technical services, insurance services, and financial services) and other transportation (which includes freight and port services) were partly offset by an increase in travel.

Imports

Imports of goods and services decreased $4.2bn in July to $196.1bn, reflecting a decrease in goods imports.

Services imports were virtually unchanged.

• The decrease in goods imports was mostly accounted for by decreases in consumer goods; automotive vehicles, parts, and engines; and capital goods.

• Services imports were virtually unchanged as a decrease in royalties and license fees (which were boosted in June by payments for rights related to the 2010 soccer World Cup) was partly offset by an increase in travel.

Goods by geographic area (not seasonally adjusted)

• The goods deficit with Canada decreased from $2.5bn in June to $1.4bn in July. Exports decreased $2.6bn to $19.7bn, while imports decreased $3.7bn to $21.1bn.

• The goods deficit with China decreased from $26.2bn in June to $25.9bn in July. Exports increased $0.6bn to $7.3bn, while imports increased $0.4bn to $33.3bn.

• The goods deficit with the European Union increased from $7.8bn in June to $9.9bn in July. Exports decreased $1.6bn to $18.8bn, while imports increased $0.5bn to $28.7bn.

• The goods surplus with Brazil increased from $0.8bn in June to $1.0bn in July. Exports increased $0.4bn to $3.4bn, while imports increased $0.2bn to $2.4bn.

The July figures show surpluses, in billions of dollars, with Hong Kong $1.8 ($2.0 for June), Singapore $1.2 ($1.0), Australia $0.9 ($1.1), and Egypt $0.4 ($0.2).  Deficits were recorded, in billions of dollars, with China $25.9 ($26.2), European Union $9.9 ($7.8), OPEC $8.0 ($8.9), Mexico $5.3 ($6.2), Japan $4.9 ($5.2), Germany $3.6 ($3.1), Nigeria $2.4 ($2.3), Ireland $2.4 ($2.3), Venezuela $1.8 ($1.7), Canada $1.4 ($2.5), Taiwan $1.0 ($1.3), and Korea $1.0 ($1.1).