The U.S. trade deficit in goods narrowed for the fifth consecutive month as oil prices plunged and the strong dollar made imported goods cheaper for U.S. consumers.
The goods trade deficit contracted 3.2% from $90.2 billion in July to $87.4 billion in August, the Census Bureau said.
The figures are nominal, ie they are not adjusted according to the evolution of prices.
The decline in imports of goods was led by a 6.4% drop in imported industrial supplies. This category includes petroleum products. The fall in oil from an average of $111 a barrel in July to around $100 a barrel in August likely explains the nominal drop in industrial supply. There is also evidence of some demand destruction for gasoline, with people driving less due to high prices at the pump.
There was also a 1.8% decline in imports of capital goods. This may reflect the strengthening of the dollar, which hit a 20-year high in August, pushing down the price of imported goods. Bank of America analysts said the decline “may reflect weakening investment plans in the face of heightened economic uncertainty.” Surveys from the Federal Reserve Banks in Richmond, Dallas and Philadelphia, however, showed capital spending by manufacturers increased in August.
Imports of consumer goods fell 0.2%, the data showed. Automotive imports rose 3.8%.
Exports fell 0.9%. Here too, the drop in the price of oil probably played a role, as exports of industrial supplies fell by 3.5%. Auto exports fell 8.9%, likely due to the strong dollar that is excluding foreign consumers from the market for US-made cars. However, US capital goods exports rose 0.4%. Exports of consumer goods jumped 8%.
Ahead of the five-month long decline, the trade peaked at a record high of $125. billion.
The same report showed wholesale inventories were up 1.3% and retail inventories up 1.4%. Both were higher than expected.
Rising inventories and falling trade deficits add to gross domestic product. After the report was released, Bank of America’s GDP tracker raised its estimate for third-quarter growth from 0.7% to 1%.