The U.S. international trade deficit narrowed by $1.2bn to $42.4bn, or a touch lower than market consensus of $42.7bn. The trade deficit for July was little revised, measuring $43.6bn versus $43.5bn previously.
Exports rose 0.4% on a month-on-month (m/m) basis in August. Consumer (+6.4%), capital (+0.9%), and automotive (+0.5%) goods helped to offset declines in food and beverage and industrial supplies exports in the month. Services exports also rose 0.4% in August.
Imports declined for the fourth consecutive month in August, falling 0.1% m/m. Declines in industrial supplies (-1.3%), capital goods (-0.9%), and food and beverages (-0.7%) offset strong rebound in automotive imports (+2.3%). Service imports were largely unchanged in the month.
Excluding the impact of price changes, export volumes fell 0.8% in August, marking two consecutive monthly declines with recent moves implying almost a full reversal of the 1.8% m/m advance from June. Similarly, import volumes declined 0.6% m/m in August.
Key Implications
There are few if any surprises in today’s trade report for August. Although the Census Bureau is unable to identify specific Hurricane Harvey related impacts, the contraction in export volumes includes a decline in the volume of petroleum exports of more than 18% m/m, but curiously shows an increase of about 2% in the volume of petroleum imports. This story is consistent with a narrative whereby inbound oil tankers destined for Southeast Texas were diverted to unaffected ports in the U.S. and Mexico.
Next month’s trade report will likely help decide how much net trade adds or detracts from third-quarter economic activity. Today’s trade report on balance suggests a very small positive impact on third quarter economic growth, particularly as refineries were slowly getting back to pre-Hurricane capacity. Still, a strong uptick in imports in September could easily swing the impact to a small drag. Looking beyond short-term volatility, strong global demand and a weaker U.S. dollar in trade-weighted terms should continue to provide some modest support for exports in the coming months.
