U.S. goods trade deficit widens considerably in October, net trade to significantly drag growth in Q4

Nominal goods trade deficit of the U.S. widens considerably in October. The advanced estimates of the U.S. trade in goods widened to USD 68.3 billion from September’s USD 64.1 billion. Consensus expectations were for a deficit of USD 64.9 billion. Exports dropped 0.4 percent sequentially, after rising strongly for two straight months. The decline was mainly due to exports of food, capital goods and consumer goods that fell 10.9 percent, 2.8 percent and 2.6 percent, respectively. The declines in these categories countered strong rises in autos, supplies and other exports.

Meanwhile, imports grew 1.9 percent, in line with strong demand and activity in the domestic market of the U.S. Imports of consumer goods, industrial supplies and the other category were especially strong.

The trade report of October implied a considerably higher deficit than was anticipated. Moreover, wholesale and retail inventories for October also came in weak. A widening in trade deficit implies that net trade is expected to considerably weigh in on the economic growth in the fourth quarter, stated Barclays in a research report. Declining capital goods export, along with solid shipments for October suggest additional equipment capital spending domestically.

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