The U.S. trade deficit narrowed to $67.1 billion in October from $81.4 billion in September. Total exports (goods and services) increased by 8.1% (-3.0% in September), while imports rose 0.9% (+0.6% in September).
Goods exports increased by 11.0% in October (-4.7% in September). The gains were broad based and led by foods, feeds and beverages (+17.1%), other merchandise (+17.0%), automotive vehicles, parts and engines (+14.1%), and industrial supplies and materials (+12.5%). Consumer goods (+8.3%, excluding automotive), and capital goods (+7.3%) also posted solid gains. Accounting for price changes, real goods exports rose by 9.5%.
Goods imports rose by are more modest 0.8% (compared to a 0.9% increase in September). Most product categories registered expansions but industrial supplies and materials (-0.9%) and capital goods (-0.7%, excluding automotive) pulled down the aggregate. Automotive vehicles, parts and engines (+5.7%) led the gainers, while food, feeds, and beverages (+1.9%), consumer goods (+1.5%, excluding automotive), and other merchandise (+1.5%) also posted increases. Excluding price changes, real imports fell 0.1% in October.
Exports of services expanded by 1.6% on the month (+1.0 % in September). Services imports rose at the same rate in October (+0.1% in September).
Key Implications
The trade deficit narrowed in October, touching levels from last spring. Imports are 18.0% above pre-pandemic levels, while exports are now 9.2% higher.
Services imports built on small gains in September and are now 2.2% above pre-pandemic levels, while the improvement in exports brought them to 6.1% below their February 2020 values. However, the prospect of increased travel restrictions in response to the emergence of the Omicron variant does cloud the outlook heading into the new year.
Still, the narrowing in the trade deficit was powered by a sharp increase in goods exports. Looking forward, it appears that the unyielding demand for goods will continue to underpin a historically wide deficit. Moreover, the emergence of yet another variant of concern raises the risk that the consumer rotation into services expenditures is further delayed, keeping the trade balance deep in deficit territory through to early 2022.
