Trade Likely Added to GDP Growth in Q3
- The goods trade deficit narrowed in August to $87.3 billion, the smallest deficit since October, from $90.2 billion in July, according to the advance estimate from the U.S. Department of Commerce.
- The value of nominal goods exports fell 0.9% on a month-over-month basis while nominal goods imports fell 1.7%.
- Trade will likely be a tailwind for GDP growth in the third quarter.
The advance nominal-goods trade deficit in August narrowed to the lowest level since October after peaking in March 2022. The goods trade deficit fell 3.2% to $87.3 billion last month from an upwardly-revised $90.2 billion in July, according to data from the U.S. Department of Commerce. This was more than the consensus expectation for a narrowing to $89 billion. Exports fell 0.9% on the month while imports fell 1.7%.
Within exports, automotive vehicles sharply declined 8.9% after growing 6.7% in July. Industrial supplies (including petroleum and petroleum products) fell 3.5% following a 1.2% contraction in July. Consumer goods exports rose 8% following a 3.4% decline in July.
The contraction in imports was driven by a sharp 6.9% decline in industrial supplies following a 2.4% decrease in July. Capital goods and consumer goods imports also contracted while foods, feeds, and beverages expanded.
With the narrowing in August, the goods deficit is now about 12% below the June level. Imports of goods and services will likely significantly decline in the near term as the Fed continues its unwavering fight against stubborn inflation by aggressively raising interest rates. Exports should improve as supply chains ease, but a slower-growing global economy is a downside risk. Supply chains have significantly improved due to softer demand for goods and services; the price of shipping one 40-foot container from Shanghai to Los Angeles dropped last week to the lowest level since August 2020. With the narrowing in the goods trade deficit in July and August, the trade will likely be a tailwind for GDP growth in the third quarter.
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