U.S. Trade Deficit was Lower than Expected in August

• The US trade deficit, released today following a more than two-week delay due to the partial federal government shutdown, was a smaller than expected $38.8 billion in August 2013 although it was up from a downwardly revised $38.6 billion (previously reported as $39.1 billion) shortfall in July. Market expectations had been for a $39.4 billion deficit in August.
• Nominal exports slipped 0.1% in August after dropping 0.6% in July following a 2.2% rise in June. Imports were unchanged after rising 1.3% in July and falling 2.2% in June.
• Excluding the effect of prices, the volume of both exports and imports slipped 0.3% in August. This left the real trade deficit (in chained 2005 dollars, Census basis) unchanged at $47.3 billion in August although following a downwardly revised $47.3 billion (was $47.7 billion) in July.
• While the nominal trade deficit in August widened slightly, a downward revision to the July shortfall left the real deficit tracking below its second-quarter 2013 level over July and August combined. This remains consistent with net trade providing a modest support to gross domestic product (GDP) growth in the third quarter of 2013. The partial federal government shutdown and uncertainty created by the contentious debt-ceiling debate may have had an effect on growth in the current quarter; however, today’s trade report along with stronger than expected August construction spending reported earlier this week, remained consistent with our monitoring that GDP grew at an annualized 2.2% rate in the third quarter of 2013, which was down only slightly from the 2.5% pace of growth in the second quarter.
• In a separate report, initial jobless claims dipped 12,000 to 350,000 for the week ending October 19, 2013, from a revised 362,000 (was 358,000) the previous week. The level of claims in the latest week was above market expectations for a 340,000 reading. The four-week moving average of claims rose to 348,250 from 337,500 for the previous week. Claims may still have been pushed higher the delayed processing of a backlog of claims in California, reportedly caused by computer problems, as well as temporary layoffs in the private sector associated with the now-ended partial government shutdown.

The US trade deficit widened but to a smaller than expected $38.8 billion in August 2013, following a downwardly revised July shortfall of $38.6 billion relative to the $39.1 billion deficit previously reported. Market expectations had been for a $39.4 billion shortfall in August. Nominal exports dipped 0.1% following a 0.6% drop in July but with a 2.2% surge in June. Much of the monthly weakness in August resulted from a 2.4% drop in petroleum exports with non-petroleum exports unchanged in the month. Imports were unchanged as a 0.1% dip in goods imports was offset by a 0.5% increase in services imports. The dip in goods imports in part resulted from lower consumer goods (-1.7%) and auto (-0.9%) imports with a partial offset provided by a 2.2% jump in capital goods imports.

Excluding the effect of prices, the real trade deficit (in chained 2005 dollars, Census basis) was unchanged from July at $47.3 billion in August although following a downwardly revised $47.3 billion deficit in July (previously reported as $47.7 billion).

While the nominal trade deficit in August widened slightly, a downward revision to the July shortfall left the real deficit tracking below its second-quarter 2013 level for July and August combined. This remains consistent with net trade providing a modest support to GDP growth in the third quarter of 2013. The partial federal government shutdown and uncertainty created by the contentious debt-ceiling debate may have had an effect on growth in the current quarter; however, today’s trade report along with stronger than expected August construction spending reported earlier this week remained consistent with our monitoring that GDP grew at an annualized 2.2% rate in the third quarter of 2013, which is down only slightly from the 2.5% pace of growth in the second quarter.

In a separate report, initial jobless claims dipped 12,000 to 350,000 for the week ending October 19, 2013 from a revised 362,000 (was 358,000) the previous week. The level of claims in the latest week was above market expectations for a 340,000 reading.

Information contained in this report has been prepared by the Economics Department of RBC Financial Group based on information obtained from sources considered to be reliable. While every effort has been made to ensure accuracy and completeness, RBC Financial Group makes no such representation or warranty, express or implied. This report is for information purposes only and does not constitute an offer to sell or a solicitation to buy securities.

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