The U.S. trade gap narrowed a little last month, but the decline doesn’t provide much relief say economists.

The U.S. trade deficit was smaller-than-expected, narrowing to US$28.8 billion in July, thanks to a record drop in exports. Imports continued their sliding trend, too.

“Today’s report provides further evidence of the toll from spreading global economic malaise on the U.S. trade position,” says CIBC World Markets. “For the fourth time in the past five months, U.S. exports fell, dropping 2.5% in the month of July, taking the trade deficit to $28.8 billion from an upwardly revised $29.1 billion in June.”

The weakness in exports was broad based, with telecoms, autos and aircraft all sliding. “Global economic activity continues to buckle,” says BMO Nesbitt Burns. “The only good news on exports was a rise in consumer goods, but this barely retraced Junes hefty 9.4% drop. The ongoing struggles of the U.S. economy were shown by the 2.1% retreat in imports. This included a 3.1% decline in capital goods, and an 18.3% plunge in semiconductors, as U.S. business investment continued to slump.”

“Today’s weak trade report is only a sign of things to come in the next few months. As the global slowdown continues to impact America’s key trading partners, falling exports are just one of the many factors that will help tip Q3 US GDP growth into negative territory. The rapid pace of decline in U.S. imports points to the continued weakness in capital spending and domestic demand, says CIBC.

BMO concludes, “The narrowing of the trade deficit was good news. The bad news was that global trade was already in retreat in July as economic activity cooled. Trade is likely to slump further in the months ahead, supporting central bank action to stimulate economic activity.”