Supply-side Headwinds Will Keep Trade Growth Subdued

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The trade deficit widened in September to a new record high. The U.S. trade deficit in goods and services rose to a seasonally adjusted $80.9 billion, from a revised $72.8 billion in August — an increase of 11.2%. The deficit has widened in eight of the past 12 months because of solid domestic demand. Its sharp growth should soon start to reverse, as oil exports recover from the disruption caused by Hurricane Ida. Supply disruptions stemming from the global spread of the Delta variant could weigh on trade in both directions and result in some volatility in the month-to-month movement of the trade balance.

Total exports plunged after rising during the past several months: they fell 3% in September. Weakness in exports was broad-based, with every major category of goods moving lower during the month. Goods exports fell 4.7%. Industrial supply exports plummeted 9.9%, while exports of capital goods fell a more modest 3.6%. Automotive exports, hurt by the semiconductor shortage, were down 2%. Exports of consumer goods were the only category that rose during the month.

Total imports increased 0.6%, thanks to strength in imports of consumer goods and capital goods. Imports were broadly positive, despite some supply headwinds causing bottlenecks at some of the nation’s largest ports.

Exports of travel services should start to rise much more strongly in November, now that most remaining restrictions on fully vaccinated inbound tourists from most foreign countries have been lifted. Exports of services rose 0.9% in September. Exports of financial services and other businesses services both climbed to all-time highs and led the rebound in services exports.

Sources: Department of Commerce, Trade Data