US trade deficit narrows sharply in September

The US monthly trade deficit narrowed sharply to $40.8bn in September, down from the revised estimate of $48.0bn in August (initial: $48.3bn). This sharp narrowing in the deficit was foreshadowed by the advance report on international trade in goods and came in close to consensus expectations of $41.0bn. Exports rebounded 1.6% m/m in nominal terms, after posting a 2.0% m/m decline in August. Imports fell 1.8% m/m in nominal terms (previous: +1.0%). Adjusting for prices, real goods exports were up 3.0% m/m (previous: -1.6%) and real goods imports declined 1.2% (previous: +2.9). This narrowing was driven primarily by a decline in the real nonpetroleum goods deficit to $54.2bn (previous: $59.3bn); the real petroleum deficit was little changed ($9.0bn, previous: $8.9bn). 

"We view the sharp September narrowing in the trade deficit largely as payback from the rapid widening seen in August. The broader trend in the real goods deficit points to the likelihood that net trade will be a drag on growth in coming quarters. Bilateral export data support this thesis; on a y/y basis, exports to Europe, Asia and Latin America remain depressed. With slower growth abroad dampening demand for US exports and solid domestic consumption supporting imports, we do not expect the deficit to continue to narrow in the coming months", says Barclays.

"Detailed import and export data for September were broadly in line with data incorporated in the advance estimate of Q3 GDP. Revisions and data on services trade suggest a slightly larger drag on growth from net exports, but after rounding, our Q3 GDP tracking estimate remains unchanged at 1.4%", added Barclays.