US goods trade deficit unexpectedly widens as imports rise

The US goods trade deficit—the amount by which goods imports exceed exports—unexpectedly widened in September as imports increased. The report suggests trade again subtracted from economic growth in the third quarter.^[1]

Gross domestic product, or GDP, measures production within a country. Its calculation subtracts imports to remove foreign-made goods and services already included in spending. With other factors unchanged, higher imports therefore reduce trade's contribution to GDP growth; September's wider gap points to that pressure in the third quarter.^[1]

For businesses, additional imports can replenish retailers' stock or supply manufacturers with materials and parts. Whether that translates into higher revenue and profit depends on the goods imported and whether businesses can sell them or put them into production.

Impact

• Import-dependent retailers and manufacturersNeutral

  Higher imports may give businesses buying abroad more merchandise and production inputs. Purchases that exceed demand can also tie up cash in inventory, so the profit effect depends on subsequent sales and production.^[1]

What to watch next

• The October 29 US third-quarter GDP release will show whether trade reduced growth and whether consumption and investment offset that drag.
• The November 4 full US September trade report, covering goods and services, will clarify how the wider goods deficit affected the overall trade balance.