U.S. trade deficit seems to have widened in October, likely to weigh on Q4 growth estimates

The U.S. trade deficit is likely to have widened sharply in October. The advance census goods balance broadened sharply to a deficit of USD 62 billion from a deficit of USD 56.5 billion, suggesting a markedly wider nominal goods balance of around a deficit of USD 63 billion as compared with a deficit of USD 57.5 billion in September. This in turn implies a nominal trade balance in October of about a deficit of USD 42.2 billion that would be a significant widening from the September level of a deficit of USD 36.4 billion.

This shows that trade’s contribution to the fourth quarter GDP would possibly be negative. After contributing 0.8 percentage points to the third quarter GDP growth, the October figure suggests a negative contribution of around 0.9 percentage points in the fourth quarter.

Exports of foods, feeds and beverages dropped USD 1.5 billion, accounting for around 44 percent of the USD 3.4 billion drop in total goods exports. This probably shows a continuation of the unwind of the rise in soybean exports witnessed in the third quarter. In the meantime, imports rose by around USD 2.1 billion, with the bulk of that reflecting a sharp increase in imports of consumer goods, probably because of importers bringing in goods before the holidays. In any case, a reading consistent with the estimate is expected to at least weigh on the fourth quarter GDP estimates for the time being, according to Societe Generale.