US Trade Deficit at 14-year high


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By: Stuart Cowell

The US trade deficit widened almost exactly as expected to a 14-year high $67.1 bln that slightly beat the $67.0 bln gap in July of 2008, leaving the largest gap since the $68.3 bln figure in August of 2006. We saw prior gaps of $63.4 (was $63.6) bln in July, $53.5 bln in June, and $57.9 bln in May. Though the deficit rise tracked estimates, it incorporated small but offsetting downside surprises for both exports and imports. Exports rose 2.2% to $171.9 bln and imports were up 3.2% to $239.0 bln, following respective July gains of 8.3% to $168.3 bln (was $168.1 bln) and 10.9% to $231.7 bln.

Excluding petroleum, the deficit expanded to -$68.6 bln from -$65.4 bln (was -$65.7 bln). The “real” August goods balance widened to -$92.3 bln versus July’s -$91.1 bln (was -$90.5 bln). We saw a slight August narrowing in the bilateral trade deficit between the US and China to -$30 bln from -$32 bln, though both figures reflect elevated import levels as suppliers respond to the intense inventory liquidation through the three quarters through to Q2. The data track robust bilateral export data from China through August.

Foreign trade was impacted harder by shutdowns than the other GDP components, and activity hit a bottom in May, versus lows for most other measures in April. We had a much bigger hit for exports than imports, and the rebound for service exports has been disappointingly small. Expectations for GDP growth now fall in the 31.5-33.0% range for Q3 and 5.5-6.0% in Q4, following the record -31.4% in Q2. 

The Dollar was steady after the trade report, which showed the deficit widening more than consensus forecasts. EURUSD remains near two-week plus highs, topping at 1.1807, just above its 50-day moving average, while USDJPY sits near mid-range around 105.60.

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