The Trade Deficit in Goods and Services Came in at $67.1 Billion in August


Implications: International trade continues to improve after some very ugly reports earlier this year. The trade deficit in goods and services came in at $67.1 billion in August, the largest since 2006. Some may look at this as a negative, but what really matters is that both exports and imports increased, consistent with the economic recovery in the US and global economic activity slowly picking back up.  Imports climbed faster than exports, which is why the trade deficit rose, and signals a faster rebound here than abroad.  Early in the COVID-19 pandemic, businesses substantially drew down inventories, now, with the holiday season approaching and economic activity picking back up, those dwindled stocks are being replenished.  The total volume of trade (imports plus exports), which signals how much businesses and consumers interact across the US border, grew 2.7% in August, but is still down 12.9% versus a year ago.   Some other good news in today's report was that for the eighth month in a row, the dollar value of US petroleum exports exceeded US petroleum imports. Horizontal drilling and fracking have transformed the global energy market and the US is no longer hostage to foreign oil. Expect trade to continue expanding rapidly in coming months as the shutdowns of business across the US and the world slowly dissipate, and new trade deals with key trading partners take effect.

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Posted on Tuesday, October 6, 2020 @ 11:19 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.