U.S. Q3 GDP likely grow at 1.4%

The Census Bureau's advance estimate of goods trade for September showed that the U.S. nominal trade deficit narrowed sharply to $58.6bn on the month, considerably more than our ($63.0bn) and consensus ($64.3bn) expectations. Nominal goods imports fell 2.6% m/m, as imports of capital goods (-2.5% m/m) and autos (-3.2 m/m) both slumped in September. 

Nonautomotive consumer goods imports declined 1.6% m/m (previous: +8.4%) but remain elevated in level terms, consistent with what we view as solid domestic demand. Exports rose 2.4% m/m, boosted by a 11.2% m/m surge in consumer goods. Excluding this surge, exports were up a more modest 1.2% m/m in September. Capital goods exports perked up (2.2% m/m, previous: 0.3%), while auto exports (1.0%, previous: -3.8%) showed more modest growth. 

The data on import and export prices indicate that the country's real goods deficit narrowed sharply in September. This substantially reduces the estimate of the drag on Q3 GDP growth from net trade to -0.1pp, from -0.7pp previously, says Barclays. Partially offsetting this effect, better-than-expected net exports of capital goods cut our tracking estimate of Q3 equipment investment. 

"Together, our Q3 GDP tracking estimate rose four-tenths to 1.4%. Looking ahead to tomorrow's advance estimate of Q3 GDP, the BEA's inclusion of this morning's data will change the composition of growth from our previous expectations. We continue to see a large drag from private inventory investment as trimming headline growth, but with a smaller drag from net trade and more modest equipment investment, the composition of Q3 GDP is likely to be more balanced", states Barclays.