The US trade deficit witnessed a significant reduction in August as exports experienced growth while imports saw a slight decline, according to government data released on Tuesday. The goods and services deficit contracted nearly 11% month over month, settling at $70.43 billion, as reported by the Census Bureau and the Bureau of Economic Analysis.
This figure came in below the market consensus estimate of a $70.5 billion deficit, following a revision of July’s deficit upwards to $78.92 billion. During August, exports increased by 2% to reach $271.76 billion, whereas imports edged down by 0.9%, amounting to $342.19 billion, as per the official statistics.
Matthew Martin, a US economist at Oxford Economics, noted that the end of the dockworkers strike earlier this month is expected to mitigate supply chain disruptions, thus lifting a significant risk from the trade outlook. The strike, which involved tens of thousands of dockworkers from the East and Gulf Coast, was initially underway but has been suspended until January 15 to allow for further contract negotiations.
Looking ahead, Martin predicts that the trade deficit will likely expand in the September report due to diminished inventories and robust consumer demand prompting higher imports. In contrast, the strength of the US dollar coupled with weaker foreign demand is anticipated to exert pressure on exports.
A closer look at goods exports reveals an increase to $179.44 billion from $175.03 billion, driven primarily by gains in both capital and consumer goods. Meanwhile, imports of goods declined from $278.26 billion to $274.32 billion, largely due to a fall in industrial supplies and materials. Service exports also saw an uptick, rising to $92.31 billion in August from $91.45 billion in July, bolstered by a surge in travel activities.
Similarly, imports of services advanced to $67.86 billion from $67.14 billion according to the data provided. Year-to-date through August, the overall goods and services deficit has escalated by 8.9% when compared to the same timeframe in 2023. The rise in imports stands at 4.9%, whereas exports saw a more modest increase of 3.9%, as detailed by the Bureau of Economic Analysis and Census Bureau..