U.S. Q3 GDP tracking 1.4% after advance September trade data

The Census Bureau's advance estimate of the U.S. goods trade for September showed that the nominal trade deficit narrowed sharply to $58.6bn on the month, considerably more than our ($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.

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 the 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. The Q3 GDP tracking estimate rose four-tenths to 1.4%", estimates Barclays.