U.S. trade deficit widens in September, likely to widen further in months ahead

The U.S. trade deficit widened in the month of September, coming in line with expectations. The deficit widened to USD 54 billion from USD 53.3 billion. The additional information received in today’s report was on services trade – the surplus dropped lower a bit.

The trade deficit has been widening for four straight months now, implying that the temporary factors that drove to a narrowing of the deficit in the second quarter have waned. Given the fiscal stimulus led boost to demand, imports are expected to trend higher, leading to a wider deficit in the months ahead, noted Barclays in a research report.

Looking into details, most of the widening in September deficit was driven by strong growth in imports that rose 1.5 percent, the fifth straight month of positive growth. Within this, capital and consumer goods imports saw strong rises.

On the exports side, goods exports recovered after three months of falls. This was driven by widespread rebounds in capital goods, auto, industrial supplies and consumer goods exports. Exports of foods, feeds & beverages – the category that drove much of the sharp rise in the second quarter exports – have been on the fall for four month, implying that the second quarter jump was greatly due to front-running ahead of the tariffs.

At 18:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at -22.2884. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex