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The Census Bureau's advance estimate of goods trade for September showed that the nominal trade deficit narrowed sharply to $58.6bn on the month, considerably more than forecast ($63.0bn) and consensus ($64.3bn) expectations. Nominal goods imports fell 2.6% m/m, as imports of capital goods (-2.5% m/m) and autos (-3.2 m/m) both slumped in September.
Nonautomotive consumer goods imports declined 1.6% m/m (previous: +8.4%) but remain elevated in level terms, consistent with what we view as solid domestic demand. Exports rose 2.4% m/m, boosted by a 11.2% m/m surge in consumer goods. Excluding this surge, exports were up a more modest 1.2% m/m in September.
Capital goods exports perked up (2.2% m/m, previous: 0.3%), while auto exports (1.0%, previous: -3.8%) showed more modest growth. While this morning's numbers represent sharper-than-expected payback from the widening in the trade deficit in August.
"We continue to see the underlying net trade dynamics as indicating the potential for slower growth abroad to dampen headline US growth going forward", says Barclays.
This morning's data, alongside import and export prices already available from the BLS, indicate that the real goods deficit narrowed sharply in September. This substantially reduces estimate of the drag on Q3 GDP growth from net trade to -0.1pp, from -0.7pp previously. Partially offsetting this effect, better-than-expected net exports of capital goods cut the tracking estimate of Q3 equipment investment. Together, Q3 GDP tracking estimate rose four-tenths to 1.4%. Looking ahead to tomorrow's advance estimate of Q3 GDP, the BEA's inclusion of this morning's data will change the composition of growth from previous expectations.
"We continue to see a large drag from private inventory investment as trimming headline growth, but with a smaller drag from net trade and more modest equipment investment, the composition of Q3 GDP is likely to be more balanced", added Barclays.
