August Trade Deficit Widens Out From July

The monthly reading on international trade is known to the rest of us as the trade deficit. It hasn’t been positive in so long that you might wonder why they don’t just officially change the name. August’s trade deficit widened out to $40.7 billion — worse than the $39 billion projected by Bloomberg and worse than the $39.5 billion deficit from July.

August exports were $187.9 billion, $1.5 billion more than exports in the month of July. August imports were $228.6 billion, up by some $2.6 billion from July’s imports.

While this reading sounds worse, there are some positive signs here. It could reflect a more normalized dollar level after the massive dollar strength from 2015. Also, investors should know that the trade deficit could contract by 50% or double and it would likely not move the market for more than a couple of minutes.

Capital goods exports on an ex-aircraft basis were slightly higher at $37.6 billion, and imports of capital goods rose by $1.2 billion to $50.2 billion in August. If you include aircraft, exports of U.S. capital goods were down by about $700 million.

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August’s reading on total exports was up by 0.8%, and the reading on total imports was up by 1.2%. As a reminder, higher imports acts as a drag against the national account. August’s trade gap with China was up by $3.6 billion to $33.9 billion, and the gap with Japan ticked down marginally to $6 billion. The trade gap with the European Union was up by $1.6 billion to $13.9 billion in August.

Year to date, the goods and services deficit fell by $4.3 billion, or 1.3%, from the same period in 2015. Exports decreased $62.4 billion, or 4.1%. Imports decreased $66.8 billion, or by about 3.6%.

A few more positives in goods were seen as follows:

• The balance with Saudi Arabia shifted from a deficit of $0.2 billion to a surplus of $0.8 billion in August.
• The surplus with Hong Kong increased $0.4 billion to $2.4 billion in August.

Deficits in goods were shown as follows for August:

• China ($29.2 billion)
• European Union ($12.3 billion)
• Japan ($5.7 billion)
• Germany ($5.3 billion)
• Mexico ($5.2 billion)
• South Korea ($2.5 billion)
• Italy ($2.4 billion)
• France ($2.0 billion)
• India ($1.9 billion)
• Taiwan ($1.5 billion)
• Canada ($1.1 billion)
• OPEC ($0.3 billion)

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