The U.S. trade deficit shrank by 10% in August to a nearly three-year low of $58.3 billion, reflecting a change in consumer spending habits and possibly some developing weakness in the economy.
The last time the deficit was that low was in September 2020, as the U.S. was beginning a long recovery from the economic shutdown early in the pandemic.
Whatever the cause, smaller deficits add to gross domestic product, the official scorecard for the U.S. economy. The declining trade gap could give a boost to third-quarter GDP, which is on track to increase by 4% or more.
Key details: Imports dipped to $314.3 billion in August, the government said Thursday. They are now almost 10% below their record high set a year and a half ago.
The U.S. imported fewer consumer goods such as cell phones and as well as computer chips. Part of the drop stems from a smaller inflow of new iPhones after the initial sales rush.
Consumers have also shifted more of their purchases to services and away from goods, a reversal of what happened during the pandemic.
Exports rose 1.6% last month to $256 billion, keeping them close to a record high. The U.S. shipped more oil, pharmaceutical drugs and computer-related equipment. Spending by tourists also increased
A rising dollar, however, could start to curb U.S. exports.
Big picture: The deficit is on track in 2023 to be the lowest in four years, but it could be a double-edged sword.
Smaller trade gaps boost gross domestic product, the official scorecard of the economy, and can appear to make the economy stronger.
Yet part of the decline could also be a sign of softer spending and portend a weaker economy.
Looking ahead: “The lower-than-expected deficit in goods and services for August will help add to an already strong quarter,” said chief economist Eugene Aleman of Raymond James.
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
were set to open lower in Thursday trades.
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