U.S. Trade Deficit Hits 2-1/2-Year High, Signals Strong Domestic Demand

The U.S. trade deficit in goods surged to a 2-1/2-year high in September, driven by a significant increase in imports, indicating robust domestic demand. While the deficit could impact GDP growth, increased retail inventories may offset the effect. Economists anticipate a 2.7% GDP growth rate for the third quarter.

The U.S. trade deficit in goods climbed to a 2-1/2-year high in September amid a marked increase in imports, reflecting vibrant domestic demand. The widening deficit, revealed by the Commerce Department, led economists to revise their third-quarter economic growth forecasts downward.

This uptick in imports overshadowed estimates, hinting at consumer spending as a primary growth driver. Nevertheless, the likely drag on GDP from the trade imbalance could be countered by rising retail inventories, with the government's GDP advance estimate for the third quarter expected soon.

The goods trade gap swelled by 14.9% to $108.2 billion, marking its highest point since March 2022, while imports reached $282.4 billion. This surge was attributed to businesses' precautionary stockpiling ahead of a potential dockworkers strike, coupled with boosts from consumer and capital goods imports.

(With inputs from agencies.)