The US trade deficit is poised for a 3-year low

The US trade deficit is poised for a 3-year low

Last updated: November 7, 2023 at 9:12 AM ET

First Published: November 7, 2023, 8:34 a.m. ET

The numbers: The U.S. trade deficit rose nearly 5% in September to $61.5 billion, but remained near a three-year low and was on track to post the smallest increase since 2020.

A smaller deficit adds up to GDP, the official scorecard for the U.S. economy. GDP grew at a rapid pace of 4.9% in the third quarter.

Key details:…

Numbers: The US trade deficit rose nearly 5% in September to $61.5 billion, but remained near a three-year low and was on track to post the smallest increase since 2020.
A smaller deficit adds up to GDP, the official scorecard for the U.S. economy. GDP grew at a rapid pace of 4.9% in the third quarter.

Key details: The government said on Tuesday that imports rose 2.7% to $322.7 billion in September.

This is the highest level since February and partly reflects US companies stocking up on inventory ahead of the holiday shopping season. Imports of mobile phones and other consumer goods increased sharply.
Exports rose a smaller 2.2% last month to $261.1 billion, just below their all-time high.
Weak economic growth in much of the world has limited demand for many U.S.-made goods, but U.S. shipments of cars, passenger planes and coronavirus-related medicines have helped keep exports high.

However, the rise in the value of the dollar could affect exports in the coming months by making them more expensive for foreign customers to purchase.
The Big Picture: The deficit in 2023 is on track to be the lowest in three years, but the United States still has historically high trade gaps.
A large part of the reason is the strong economic recovery in the United States since the outbreak of the pandemic. Americans can buy more foreign imports like iPhones, clothing, and liquor.

However, if the economy slows and Americans are no longer able to buy so many imports, a declining trade deficit would actually be a sign of deteriorating conditions in the United States.
“Our view that consumption growth is likely to slow sharply, with the impact of weak real income growth and higher borrowing costs, means that import growth will moderate again soon,” US deputy chief economist Andrew Hunter of Capital Economics wrote in a note to clients. .
“The recent rise in exports has been difficult to explain, but with most other advanced economies seemingly on the cusp of recession while growth in China is faltering again, this rise is unlikely to continue either.”
Market reaction: Dow Jones Industrial Average

DJIA

And Standard & Poor’s 500

SPX

It is scheduled to open lower on Tuesday.

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