US trade deficit widens on greater imports, drop in exports

DATA from the US Commerce Department showed that the country’s trade deficit widened for a second month in October, as the value of imports increased and exports declined. This may weigh on economic growth in the fourth quarter.

The data, released on Tuesday (Dec 6), indicated that the trade gap in goods and services grew by US$4 billion, or 5.4 per cent, to US$78.2 billion from a month earlier. The figures were not adjusted for inflation. The median estimate in a Bloomberg survey of economists was a gap of US$80 billion.

The value of goods and services imports rose 0.6 per cent to US$334.8 billion, while exports declined 0.7 per cent to US$256.6 billion.

The widening of the deficit in October – the greatest expansion since June – suggested that trade will likely have a much more muted impact on fourth-quarter gross domestic product (GDP). This was after trade’s contribution to GDP in the quarter prior was the highest it had been since 1980.

Meanwhile, foreign demand for US goods and services remains soft as many economies contend with persistent inflation and rising interest rates. Although the dollar has erased much of its advance this year in recent months, the strong currency is still keeping US goods more expensive for overseas customers.

On an inflation-adjusted basis, the October merchandise trade deficit increased to US$112.6 billion, also the widest in four months. BLOOMBERG