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US goods trade deficit rises; inventories increase

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The United States' trade deficit in goods increased in August, with imports surging as businesses rebuild inventories which were depleted early in the Covid-19 pandemic, suggesting trade could be drag on economic growth in the third quarter.

[WASHINGTON] The United States' trade deficit in goods increased in August, with imports surging as businesses rebuild inventories which were depleted early in the Covid-19 pandemic, suggesting trade could be drag on economic growth in the third quarter.

Still, the widening in the goods trade gap reported by the Commerce Department on Tuesday did not change expectations for a record jump in gross domestic product in the third quarter after output plunged in the April-June period at its steepest pace since 1947.

The economy got a boost over the summer from the reopening of businesses and a rescue package from the government. But new coronavirus cases are rising and money from the government for businesses and the unemployment is running out, resulting in slowing economic activity heading into the fourth quarter.

The goods trade gap increased 3.5 per cent to US$82.9 billion last month. Imports of goods rose 3.1 per cent to US$201.3 billion, eclipsing a 2.8 per cent increase in goods exports to US$118.3 billion.

The rise in imports last month was led by consumer goods, which increased 7 per cent. There were also strong gains in imports of food, capital and consumer goods. But imports of industrial supplies fell 4.6 per cent.

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Exports of industrial supplies and food rose. But shipments of motor vehicles and parts, capital goods and consumer goods fell.

Trade could subtract from GDP growth in the third quarter for the first time since the second quarter of 2019. But with much of the imports going to replenish inventories, the hit to GDP growth from the bigger goods trade deficit could be modest.

The Commerce Department also reported on Tuesday that retail inventories increased 0.8 per cent in August after rebounding 1.2 per cent in July. Motor vehicle and parts inventories gained 0.6 per cent. Retail inventories, excluding motor vehicles and parts, the component that goes into the calculation of GDP, shot up 0.9 per cent after climbing 0.6 per cent in July.

Wholesale inventories rebounded 0.5 per cent in August after dipping 0.1 per cent in the prior month. Inventory accumulation is expected to contribute to GDP growth in the third quarter after subtracting from output for five straight quarters.

REUTERS

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