US October trade report trims GDP tracking estimates

The US trade deficit came in at -$43.9bn October, wider than forecast and consensus expectations of $40.5bn in part due to a revision to prior months' data. The September trade deficit was revised to $42.5bn, up from $40.8bn in last month's estimate. In October, the nominal goods deficit was revised to -$61.3bn, from -$58.4bn reported in the advance estimate last week.

Total exports fell 1.4 m/m in October (previous: +1.4%) in nominal terms, with broad-based declines led by food and beverages (-5.5%, previous: 3.7%), consumer goods (-3.0% m/m, previous: 8.0%) and industrial supplies (-4.6 m/m, previous: 0.0%). The latter reflects monthly volatility in energy prices.

 Total nominal imports were down 0.6% m/m (previous: -1.6%), held down by the same decline in energy prices. In real terms, goods exports fell 2.4% m/m (previous: +2.8%) and goods imports were flat on the month (previous: -1.2% m/m). This led the real goods deficit to widen to $60.3bn (previous: $57.3), with the real nonpetroleum goods deficit at $57.6bn (previous: $54.3bn).

On balance, the October trade report is consistent with the view that soft international demand and the strong dollar will lead net exports to continue to act as a headwind to GDP growth over the next several quarters.

"Revisions to the prior month's data suggest that net trade subtracted 0.4pp from Q3 growth, more than the -0.2pp contribution reported in the second estimate of GDP. This lowered our Q3 GDP tracking estimate by two-tenths, to 1.8%. These revisions, along with the October data, suggest a wider trade deficit in Q4. Taken against the estimated wider Q3 deficit, our Q4 GDP tracking fell one-tenth after rounding to 2.0%", says Barclays.