US trade deficit narrows for a fifth month to smallest in a year

THE US trade deficit shrank for a fifth month in August to smallest in more than a year, reflecting a decline in the value of imports that’s poised to lend support to economic growth in the third quarter.

The trade gap in goods and services narrowed by US$3.1 billion, or 4.3 per cent from a month earlier, to US$67.4 billion, Commerce Department data showed on Wednesday (Oct 5). The figure, which isn’t adjusted for inflation, was in line with the US$67.7 billion median estimate in a Bloomberg survey of economists.

The value of goods and services imports fell 1.1 per cent in August to US$326.3 billion, while exports eased 0.3 per cent to US$258.9 billion, according to the government.

A shift in consumer spending patterns that favours services and experiences – and comes at the expense of merchandise – is helping temper demand for products made overseas. Furthermore, some retailers have reported cancelling and reducing orders to bring inventories more in line with sales. 

Meanwhile, external demand for US goods and services remains soft as economies in much of the world struggle for momentum against a backdrop of rising interest rates and high inflation. A soaring dollar is also making US goods more expensive for overseas customers.

On an inflation-adjusted basis, the August merchandise trade deficit shrank to about US$99 billion, the smallest since January 2021. BLOOMBERG