Following a marginal improvement in August, the US foreign trade deficit widened appreciably again in September. Despite a solid expansion in exports the external deficit in merchandise and services trade rose by a good USD 5½bn to USD 36.5bn. The key factors behind the deterioration were not only price effects on the oil front, but also a marked rise in real merchandise imports (6.2%). Given the clear recovery in price-adjusted merchandise exports and imports at the end of the third quarter, prospects are favorable that both will continue to grow strongly in the current quarter. But this means that the contribution to growth from foreign trade will probably remain marginally negative.
On balance the September merchandise trade figures are less favorable than assumed by the Bureau of Economic Analysis in its initial estimate of third quarter GDP. Together with complete figures now available for other demand components, it looks likely that the second estimate (to be published on 24 November) could show an annualized GDP increase of only just under 3% (initial estimate: 3.5%).