September Trade Deficit Narrows Despite Strong US Dollar

Friday’s major economic report was the Employment Situation from the Labor Department, showing muted payrolls gains. The report on international trade (or the trade deficit) may not be a market-moving number on its own, and being overshadowed by the muted payrolls report makes it perhaps even less pertinent than before.

International trade was down by $36.4 billion in September, versus the drop of $38.9 billion expected by Bloomberg. The Econoday range was −$44 billion to −$36 billion.

August was revised to −$40.5 billion from a preliminary reading of −$40.7 billion.

A decline in imports actually helped the number look soft, which feels odd considering that the U.S. dollar is still quite strong. Imports were down 1.1%, with a decline in capital goods and in consumer goods. Exports rose by 0.6%, after a strong gain for capital goods.

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A nation by nation report with key partners where the United States runs at big deficits was shown as follows:

• The U.S. deficit with China, a political hot button for years now,  shrank by $1.4 billion to $32.5 billion.
• The trade deficit with the European Union narrowed by $3.7 billion to $10.1 billion.
• The deficit with Japan was down by $1.2 billion to $4.8 billion.
• Mexico was steady at $5.2 billion.

The good news here is that a drop in imports will act as a positive for gross domestic product (GDP). Higher exports are a boost for GDP. This data still does not give a ringing endorsement for business activity, but it is one more report showing that the deficit can at least shrink.

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