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Lower oil prices were the main reason the trade deficit narrowed in May, he said. Further price declines should narrow deficits further in June and July. U.S. export growth has slowed and will slow further "given the sharp slowdown in economic growth in Europe and Asia," Ashworth said. He predicted that trade would be a drag on growth in the second half of this year "and probably through 2013 as well." The U.S. deficit with the EU widened 21 percent in May to $10.5 billion because imports from Europe increased 7.8 percent. America's trade deficit with China increased to $26 billion in May. U.S. exports to China rose 5.2 percent, but imports rose by a faster 5.8 percent. The deficit with China is the largest with any country and is on pace to break last year's all-time high. Other reports suggest exports have slowed since May. A survey by the Institute for Supply Management, a trade group of purchasing managers, said U.S. manufacturing shrank in June for the first time in nearly three years. The survey noted that exports declined and new orders plunged. Economic growth of 1.9 percent is not enough to significantly lower the unemployment rate, which stayed at 8.2 percent in June.
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