- The U.S. trade deficit increased to $67.1 billion in August from $63.4 billion in July, as imports outpaced exports.
- Exports grew by 2.2% (from 8.3% in July). The growth in exports was seen in most product categories. Industrial supplies (10.9%) and foods, feeds & beverages (10.5%) saw some of the largest increases. However, export growth of capital goods and other goods contracted for the first time since May. Accounting for price effects, real goods exports increased by 2.6% in August.
- Imports also grew almost across the board with a 3.2% increase (compared to 10.9% in July). Consumer goods were responsible for most of the increase in total imports, increasing by 7.1% (same as July). Capital goods, however, contracted by 3.9% in August (12.3% growth in July). Excluding price effects, real imports increased by only 2.1% in August.
- Services trade continued to grow, albeit at a slower pace. Exports of services increased 0.3% (0.8% in July) for the month, while imports increased by 2.4% (3.4% in July).
Key Implications
- Both exports and imports continue to improve, albeit much slower than the last couple of months. Despite the continued improvement, exports and imports of goods and services still remain below the levels seen last year, down 18% and 9% from August 2019, respectively. There is still a long way to go before trade reaches pre-pandemic levels. The slowdown in recovery shows that U.S. trade has reaped the low-hanging fruit and has gone past its “pent-up” stage.
- The trade recovery over the next few months is likely to be moderated by a resurgence of new cases in the U.S. and other parts of the world. Since many states (barring a few exceptions) and American trading partners re-enacted restrictions (especially on the services sector) throughout most of September, we expect to see a more subdued recovery next month. Sporadic flareups of new cases and subsequent restrictions across the world are likely to keep demand subdued and prevent businesses from operating at full capacity. As a result, trade statistics are likely to improve in a tentative, slow, and uneven manner.
