U.S. Trade: Record Exports Narrow Deficit, But Domestic Demand Dominates

In August, the U.S. trade deficit narrowed significantly thanks to record-high exports, indicating stability in the third-quarter economic growth. However, the robust economy has not changed Federal Reserve's interest rate outlook. Despite current trends, the long-term global demand outlook remains uncertain.

In August, the United States saw its trade deficit narrow sharply, attributed to record-high exports, signaling steady economic growth for the third quarter. The Commerce Department's report of a $70.4 billion trade gap reinforces a positive economic outlook, alongside signals from labor market and consumer spending data.

This economic strength is unlikely to impact the Federal Reserve's upcoming interest rate decisions, despite speculation on further cuts. Economists predict a 3.2% GDP growth rate for the third quarter. Export increases, including goods and services, drove the deficit reduction, while imports slightly fell.

Analysts warn that the rise in exports is unlikely sustainable due to global demand concerns, particularly stemming from China and the Eurozone, while domestic demand remains strong. As a result, trade may continue to exert a modest drag on GDP growth in subsequent quarters.

(With inputs from agencies.)