Trade deficit widened in September

November 7, 2023

The U.S. international trade deficit widened 4.9% during the month of September to $61.5 billion. That reverses about half of the large decrease in the deficit we saw during the month of August. Both exports and imports continued their sharp march upward as consumers both in the U.S. and abroad have been far more resilient in the face of rate hikes than previously expected. The deficit has still narrowed by 20% year-over-year with exports back to a peak reached in August 2022.

Imports climbed by 2.7% in September, more than the increase of 2.2% in exports. That is not surprising, considering the sharp increase in overall and core retail sales in September, up 0.7% and 0.6%, respectively. The increases in imports were broad-based with increases in consumer goods such as cell phones, passenger cars, capital goods, industrial supplies and services all increasing between $1 and $2 billion. September was a strong international travel month with both travel and transport services imports increasing. The number of those out on vacation in the employment report for the month remained elevated.

Exports increased mainly on the industrial side, with petroleum and crude oil, soybeans and corn all posting significant increases. Exports of services increased slightly, albeit less than imports of services. Recent appreciation of the dollar may hamper the sharp rise in exports we saw over the summer and travel by foreigners to the U.S.

The data on international trade is not adjusted for inflation. Import prices rose 0.14% in September, bringing real import increases to around 2.5%. Export prices rose much more, up 0.74%. Real exports, therefore, rose by about 1.5%. That means that the increase in the trade deficit will show up much more in the national accounts. Trade for the third quarter was negative for GDP despite a narrowing of the trade deficit in nominal terms.