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US: Trade Deficit Widens in September, as Exports Pull Back

The U.S. trade deficit widened to $80.9 billion in September from $72.8 billion in August. Total exports (goods and services) decreased by 3.0% (+0.6% in August), while imports increased 0.6% (+1.3% in August).

Goods exports decreased by 4.7% in September (+0.8% in August). The losses were broad based and led by industrial supplies and materials (-9.9%), capital goods (-3.6%), and automotive vehicles, parts and engines (-2.0%). Consumer goods (+3.7%, excluding automotive) were the lone gainers for the month. Accounting for price changes, real goods exports fell by 4.9 %.

Goods imports increased by 0.8% (+1.1% in August). Results were mixed across categories, with capital goods (+4.0%), other merchandise (+8.1%), and industrial supplies and materials (+1.7%) registering gains. These were offset by a pull-back in automotive vehicles, parts and engines (-7.7%), consumer goods (-0.1%, excluding automotive) and foods, feeds and beverages (-0.4%). Excluding price changes, real imports rose 1.0% in September.

Exports of services expanded by 0.9% on the month (0.2% in August), while imports of services fell by 0.4% (after a 2.6% gain in August).

Key Implications

The trade deficit widened again in September, reaching a new low. Imports are 17.1% above pre-pandemic levels, while exports are now 1.3% higher.

Trade in services continues its tepid recovery. Service imports have managed to claw their way back, now 1.2% above pre-pandemic levels, but exports continue to languish 6.2% below their February 2020 values.

Consumer demand for goods continues to sustain the deficit in deep negative terrain. September’s data showed that services spending was still 1.7% below pre-pandemic levels, and only accounted for 65.5% of the outlays – well below its 69.2% reading in February 2020. The emergence of the Delta variant in the summer may have stalled the rotation of spending back to services, but we maintain the view that the trend is heading that way, and should help to narrow the trade deficit.

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