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The trade deficit rose in September as imports snapped back. The U.S. trade deficit in goods and services hit a seasonally adjusted $61.5 billion, up from $58.7 billion in August. The trade deficit is a measure of the difference between what the United States buys from foreign nations and what it sells overseas. September’s data reflected strong gains in imports and exports, which have risen modestly over the third quarter. With the global economy weakening and domestic consumption and investment growth likely to slow, the strength in trade flows will subside over the coming months. Year-to-date, the trade deficit is down 20% from the same period in 2022. Over the past year, the deficit with China and Taiwan has risen, while the deficit with Germany has declined.
Exports growth is still robust, but the outlook remains bleak. Exports were strong across the board in September, resulting in a 2.2% increase. The recent strengthening of the dollar makes American goods more expensive to foreigners, which will likely dampen export growth over the next few months. With most of the country’s major trading partners struggling to generate much economic growth, the outlook for exports looks weak.
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An increase in inbound shipments of consumer goods led to a 2.7% rise in total imports. The monthly gain was led by consumer goods and motor vehicles and parts. With the help of solid hiring and low unemployment, demand for foreign-made goods remains firm. That said, imports have largely been decreasing since peaking early last year, as shifts in consumer spending toward services translate into lower demand for foreign-made products.
The surplus in services trade fell from a record high, slipping in September to a still-healthy $24.8 billion. Historically, the United States imports more goods than it exports but runs a surplus in services trade. Exports of services rose on higher demand for travel and transportation services by visitors to the United States. Imports of services rose even more, due to higher demand for overseas travel and transport by Americans.
Trade’s net contribution to GDP growth in the third quarter will likely be modest, based on the stronger performance of exports than imports.
Source: Department of Commerce, Trade Data
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