U.S. Trade Deficit Expands While Canadian Gap Narrows

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Meanwhile, here are the major economic headlines from the last week:

• The U.S. goods and services trade deficit was $78.3 billion in July, up $19.2 billion from June. The higher deficit reflected an increase in the goods deficit of $18.2 billion to $103.9 billion and a fall in the services surplus of $1.1 billion to $25.6 billion. Year-to-date, the deficit is up 30.9 percent from the same period in 2024.
• Statistics Canada announced that, in July, the country’s merchandise exports rose 0.9 percent while imports were down 0.7 percent. As a result, Canada’s merchandise trade deficit with the world narrowed from $6 billion in June to $4.9 billion in July. Read the full report at this link.
• According to Statistics Canada, the country’s real gross domestic product (GDP) declined 0.4 percent in the second quarter of 2025, following a 0.5 percent gain in the first quarter. The contraction in the second quarter was driven by significant declines in the export of goods, as well as decreased business investment in machinery and equipment. The declines were tempered by faster accumulations of business inventories, higher household spending, and lower imports of goods.
• Meanwhile, the U.S. Bureau of Economic Analysis revised economic growth for the second quarter to an annualized 3.3 percent growth rate from a previously-estimated rate of three percent. The revision was due to stronger business investment (that reading was up 5.7 percent) and international trade. The business investment reading was led by growth in transportation equipment and intellectual property. Additionally, consumer spending rose 1.6 percent and corporate profits increased 1.7 percent.
• New orders for U.S. manufactured goods fell 1.3 percent in July while shipments rose 0.9 percent. Unfilled orders increased were virtually unchanged and the unfilled orders-to-shipments ratio was 6.87, down from 7.01 in June. Inventories rose 0.3 percent and the inventories-to-shipments ratio was 1.56, down from 1.57 in June.
• The Institute for Supply Management purchasing managers’ index (PMI) rose to 48.7 percent in August from 48 percent in July. The new orders and new export orders indexes saw improvements, rising to 51.4 percent and 47.6 percent, respectively, while the production reading returned to contraction territory after growing in July It fell from 51.4 percent to 47.8 percent. Read the full report at this link.
• The S&P Global Canada PMI rose to 48.3 in August, up from 46.1 in July and the highest PMI reading since January 2025. The improvement reflected slower declines in both output and new work. Production declined at the slowest rate since February 2025 while new orders contracted.
• Regional manufacturing readings in the United States were mixed in August. The composite index for the Federal Reserve Bank of Kansas City’s manufacturing index was +1 in August, unchanged from July. The durable manufacturing sector was mostly flat, while nondurable manufacturing activity declined slightly due to drops in printing activities and paper and chemical manufacturing. Most month-over month indexes were positive with the exception of the backlog of orders, new export orders, and inventories. Read the full report at this link. Manufacturing activity in the Mid-Atlantic region remained in contractionary territory, meanwhile. The Federal Reserve Board of Richmond’s composite index rose to -7, up from -20 in July, and shipments, new orders, and employment indexes all improved, but were still below the zero mark that separates contraction and expansion. Local business conditions were flat, while future expectations for shipments and employment improved. Read the full report at this link. Additionally, factory activity fell slightly in Texas in August, according to the Federal Reserve Bank of Dallas’s manufacturing survey. The bank’s general business activity index slowed from +0.9 to -1.8, indicating a slight contraction, while its production index fell from +21.3 to +15.3. Employment and shipments readings increased, while capacity utilization declined. The forward-looking activity index rose to +24.8, and the reading for new orders increased from -3.6 to +5.8. Read the full report at this link.
• Total construction spending in the United States fell 0.1 percent from June 2025 to July 2025 and 2.8 percent from July 2024 to July 2025.
• U.S. consumer prices rose 0.2 percent from June 2025 to July 2025 and 2.6 percent from July 2024 to July 2026, according to the personal consumption expenditures (PCE) index. Core PCE, a key measure for the Federal Reserve to determine interest rates, reached 2.9 percent year-over-year, the highest rate of growth since February, and 0.3 percent for the month.
• The U.S. economy added 22,000 jobs in August, well below economists’ expectations, while the country’s unemployment rate rose from 4.2 percent to 4.3 percent. Manufacturing firms shed 12,000 jobs. Read the full report at this link.
• Canada’s unemployment rate also rose last month after the nation’s economy shed 66,000 jobs. The unemployment rate increased 0.2 percentage points to 7.1 percent, a level not seen since the early days of the COVID-19 pandemic and, before that, May 2016.
• The number of people who claimed U.S. unemployment benefits for the first time ever was 237,000 during the week that ended Aug. 30. That number was up by 8,000 from the previous week. Averaged over the past four weeks, the number of first-time claims was 231,000, an increase 2,500 from the week before. In all, more than 1.94 million people claimed federal unemployment benefits during the week that ended Aug. 23, a figure that was down by 4,000 from the previous week.