The U.S. trade deficit raced to a record high in August, boosted by imports as businesses rebuild inventories, the latest sign that economic growth slowed in the third quarter.
The trade deficit surged 4.2 per cent to $73.3-billion last month, the highest since the government started tracking the series, the Commerce Department said on Tuesday. Economists polled by Reuters had forecast the trade gap widening to $70.5-billion.
When adjusted for inflation, the goods trade deficit increased $1.9-billion to $101.8-billion in August. The report followed on the heels of government data last Friday showing high inflation sharply cutting into consumer spending in July, with a moderate rebound in August.
The Atlanta Federal Reserve is forecasting gross domestic product growth braking to a 2.3 per cent annualized rate in the third quarter. The economy grew at a 6.7 per cent pace in the second quarter. Trade has subtracted from GDP growth for four straight quarters.
Imports of goods rose 1.1 per cent to $239.1-billion in August. The increase was led by consumer goods such as pharmaceutical preparations, toys, games and sporting goods. There was also a rise in imports of industrial supplies and materials.
But imports of motor vehicles, parts and engines decreased $1.5-billion, reflecting a global semiconductor shortage, which is hampering production. Demand for goods remains strong even as spending is shifting back to services like travel as more people are vaccinated against COVID-19.
Imports of services increased $1.3-billion to $47.9-billion in August. Overall, imports shot up 1.4 per cent to $287.0-billion, the highest on record.
Goods exports rose 0.7 per cent to a record $149.7-billion. Exports were lifted by industrial supplies and materials such as nonmonetary gold and natural gas. But exports of motor vehicles, parts and engines fell as did capital goods like civilian 239105/2364.5
aircraft and industrial machinery. Corn exports also dropped.
Exports of services decreased $0.1-billion to $64.0-billion in August, reflecting still weak travel receipts amid pandemic-related restrictions. There were, however, increases in exports of business services and charges for the use of intellectual property. In total, exports gained 0.5 per cent to $213.7-billion in August, the highest since May 2019.
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.