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Economy in Brief

U.S. Trade Deficit Narrows Again in August
by Sandy Batten  October 5, 2022

• Deficit is smallest since May 2021.

• Both exports and imports fell in August.

• Real trade balance on course to add 2%-points to Q3 GDP growth.

The U.S. trade deficit in goods and services (BOP basis) fell to $67.4 billion in August from a slightly downwardly revised $70.5 billion in July (initially $70.7 billion). The deficit has narrowed markedly from its record $106.9 billion in March. A $68.0 billion deficit had been expected in the Action Economics Forecast Survey. Exports slipped 0.3% m/m (+20.0% y/y) in August, their first monthly decline since January, offsetting a 0.3% m/m increase in July. Imports fell 1.1% m/m (+13.6% y/y), their third consecutive monthly decline, on top of a 2.8% m/m fall in July.

The narrowing in the goods and services deficit was due entirely to a narrowing in the goods trade deficit—to $87.6 billion in August from $91.1 billion in July. The services surplus narrowed slightly in August—to $20.2 billion from $20.6 billion

Exports of goods (customs value) fell 0.7% m/m in August after a 0.4% monthly gain in July. Exports of industrial supplies fell 2.9% m/m and auto exports plunged 7.7% m/m. By contrast, exports of nonfood consumer goods excluding autos climbed 6.4% m/m. Services exports were essentially unchanged in August following a 1.3% m/m increase in July. Travel services exports fell 2.9% m/m while exports of other business services and financial services gained.

Imports of goods (custom value) fell 1.5% m/m in August, their fifth consecutive monthly decline after a 10.9% monthly surge in March. The August decline was led by industrial supplies (-6.5% m/m) and capital goods excluding autos (-1.5% m/m). Auto imports increased 3.3% m/m in August on top of a 6.1% monthly gain in July. Petroleum imports collapsed 12.7% m/m in August, their first decline in seven months, dragged down by falling prices. Nonpetroleum goods imports edged down 0.2% m/m, their fifth consecutive monthly decline. Imports of services increased 0.7% m/m in August, far short of offsetting their 2.2% monthly decline in July. Travel services imports rebounded 2.7% m/m following a 2.9% monthly fall in July while imports of insurance services and financial services fell.

The real (inflation-adjusted) goods trade deficit fell to $99.0 billion (chained 2012 dollars) in August from $103.1 billion in July. It was the smallest deficit since January 2021. The shrinking real trade deficit in Q2 added 1.2%-points to real GDP growth. The further marked narrowing in July and August puts the trade deficit on track to add another 2%-points to GDP growth in Q3.

The goods trade deficit with China increased to a seasonally adjusted $33.55 billion in August from $32.97 billion in July. Exports and imports each rose 1.7% m/m. The trade deficit with Japan narrowed to $3.61 billion in August from $5.49 billion in July. The goods trade deficit with the European Union widened to $13.47 billion in August from $11.92 billion in July.

The international trade data, including relevant data on oil prices, can be found in Haver's USECON database. Detailed figures on international trade are available in the USINT database. The expectations figures are from the Action Economics Forecast Survey in AS1REPNA.

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