U.S. trade deficit widens in August on higher rise in imports

The U.S. trade deficit widened in the month of August to USD 67.1 billion from July’s USD 63.4 billion, as imports rose more than exports.

Exports rose 2.2 percent in the month, a deceleration from July’s growth of 8.3 percent. The growth in exports was seen in most product categories. Industrial supplies and foods, feeds & beverages recorded some of the largest rises. Nevertheless, export growth of capital goods and other goods shrank for the first time since May. Accounting for price effects, real goods exports rose 2.6 percent in August.

Imports also expanded nearly throughout the board with a 3.2 percent rise. Consumer goods were responsible for most of the rise in total imports, growing 7.1 percent. However, capital goods shrank 3.9 percent in August. Stripping price effects, real imports rose just 2.1 percent in August.

Services trade continued to rise, although at a slower rate. Exports of service rose 0.3 percent for the month, whereas imports saw a rise of 2.4 percent.

Both exports and imports continue to rebound, although much slower than the last couple of months. In spite of the continued rebound, exports and imports of goods and services still continue to be below the levels seen last year, down 18 percent and 9 percent from August 2019, respectively.

“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”, stated TD Economics in a research report.