US Goods Trade Deficit Widens Sharply in August

The US trade deficit in goods widened sharply in August amid a surge in imports, suggesting that trade could remain a drag economic growth in the third quarter. The goods trade shortfall increased 11.5 percent to $132.6 billion last month, the Commerce Department’s Census Bureau said on Wednesday. Economists polled by Reuters had forecast the goods deficit at $115.0 billion.

Goods imports soared $17.4 billion, or 5.5 percent, to $336.1 billion. They were driven by a 16.6 percent jump in imports of industrial supplies, which include petroleum. Capital goods imports rose 4.0 percent amid an AI infrastructure buildout. Food imports increased 5.5 percent.

But consumer goods imports fell 1.6 percent. Exports of goods advanced $3.7 billion, or 1.9 percent, to $203.4 billion.Exports of industrial supplies rose 8.3 percent.

But shipments of consumer goods dropped 10.5 percent, while those of motor vehicles and parts decreased 6.9 percent. Food exports declined 5.6 percent.

Trade has subtracted from gross domestic product for three straight quarters. Some of the hit from the trade deficit on GDP growth could be blunted by rising inventories.

The Census report showed wholesale inventories increased 0.7 percent in August while stocks at retailers climbed 0.3 percent.

Meanwhile, the US Commerce Department on Wednesday revised upwards its estimate for second-quarter GDP growth in the world’s largest economy, moving it up by 0.7 percentage points to 2.2 percent. “The contributors to the increase in real GDP in the second quarter were consumer spending, investment, and exports. Imports, which are a subtraction in the calculation of GDP, increased,” the Bureau of Economic Analysis said in a statement.

The new data will come as a boost to US President Donald Trump as his Republican Party heads into key midterm elections in November.

In terms of specific industries, the leading contributors to the increase were real estate, information, durable goods manufacturing, and finance and insurance, the BEA said. Decreases came from the transportation and retail trade, as well as from non-durable goods manufacturing.

The BEA also revised upwards its estimate of GDP growth in the first quarter of this year by 0.4 percentage points to 2.5 percent. That change was primarily driven by upward revisions to consumer spending and services exports, the department said.