The US trade deficit narrowed more than expected in August as exports increased solidly, likely positioning trade to support economic growth in the third quarter.

The trade deficit contracted 9.9 per cent to US$58.3 billion, the lowest level since September 2020, the Commerce Department said on Thursday (Oct 5).

Data for July was revised to show the trade gap rising to US$64.7 billion instead of US$65.0 billion as previously reported. Economists polled by Reuters had forecast the trade deficit shrinking to US$62.3 billion in August.

Exports of goods and services increased 1.6 per cent to US$256.0 billion. Goods exports shot up 1.8 per cent to US$171.5 billion, with shipments of capital goods hitting a record high.

But exports of foods, feeds and beverages were the lowest since August 2020. At US$84.5 billion, exports of services were the highest on record.

Imports of goods and services fell 0.7 per cent to US$314.3 billion. Goods imports dropped 0.9 per cent to US$256.0 billion, potentially flagging softening domestic demand amid higher borrowing costs.

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The services surplus at US$26.2 billion was the highest since March 2018. Trade made no contribution to the economy’s 2.1 per cent annualised growth rate in the second quarter. REUTERS