US Trade Deficit Unexpectedly Grows In August, Pressuring Q3 GDP

While the recently reported advance trade data showed a far better than expected recent trade picture for the US, today’s official international trade data showed another modest disappointment, with the US trade deficit in August growing from an upward revised $39.6 billion to $40.7 billion, well above the expected $39.3 billion, as imports increased more than exports. The goods deficit decreased less than $0.1 billion in August to $60.3 billion. The services surplus decreased $1.2 billion in August to $19.6 billion.

A detailed breakdown, reveals that exports of goods and services increased $1.5 billion, or 0.8 percent, in August to $187.9 billion. Exports of goods increased $1.2 billion and exports of services increased $0.3 billion.

  • The increase in exports of goods reflected an increase in industrial supplies and materials ($1.4 billion). A decrease in capital goods ($0.7 billion) was partly offsetting.
  • The increase in exports of services mainly reflected an increase in travel (for all purposes including education) ($0.2 billion).

Imports of goods and services increased $2.6 billion, or 1.2 percent, in August to $228.6 billion. Imports of goods increased $1.1 billion and imports of services increased $1.5 billion.

  • The increase in imports of goods reflected an increase in capital goods ($1.2 billion). A decrease in industrial supplies and materials ($0.8 billion) was partly offsetting.
  • The increase in imports of services reflected an increase in charges for the use of intellectual property ($1.2 billion), which included payments for the rights to broadcast the 2016 Summer Olympic Games.

The regional trade breakdown was as follows: the August figures show surpluses, in billions of dollars, with Hong Kong ($2.4), South and Central America ($1.7), Saudi Arabia ($0.8), Singapore ($0.7), United Kingdom ($0.4), and Brazil ($0.2). Deficits were recorded, in billions of dollars, with China ($29.2), European Union ($12.3), Japan ($5.7), Germany ($5.3), Mexico ($5.2), South Korea ($2.5), Italy ($2.4), France ($2.0), India ($1.9), Taiwan ($1.5), Canada ($1.1), and OPEC ($0.3).

  • The surplus with Hong Kong increased $0.4 billion to $2.4 billion in August. Exports increased $0.4 billion to $3.0 billion and imports increased less than $0.1 billion to $0.7 billion.
  • The balance with Saudi Arabia shifted from a deficit of $0.2 billion to a surplus of $0.8 billion in August. Exports increased $1.3 billion to $2.5 billion and imports increased $0.4 billion to $1.7 billion.
  • The deficit with France increased $1.0 billion to $2.0 billion in August. Exports decreased $0.6 billion to $2.3 billion and imports increased $0.4 billion to $4.3 billion.

While there was some good news in the report, in that exports finally turned positive on a Y/Y basis for the first time in nearly 2 years…

… the wider than expected trade deficit for August will likely mean more GDP cuts from the likes of Atlanta Fed, and with today’s disappointing data, the service may have no choice but to trim its Q3 GDP forecast to 2.0% or less.


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Author: Tyler Durden

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