US goods trade deficit widens more than expected in August

• Prior reading was -$118.9 billion

The deficit in US trade of goods expanded to $132.6 billion during August, climbing $13.7 billion compared with the $118.9 billion recorded in July. The deficit increase was mainly caused by a bigger advance in imports relative to exports. Imports of goods rose by $17.4 billion, reaching $336.1 billion, while exports moved higher by $3.7 billion to $203.4 billion.

Inventory figures pointed to ongoing stockpiling at both wholesalers and retailers. Wholesale inventories were up 0.7% compared with the prior month and stood 6.6% above their year-ago level; retail inventories advanced 0.3% on a monthly basis and 4.8% year over year. Each monthly inventory gain was less than what was seen in the preceding period, when wholesale inventories recorded a 1.3% increase and retail inventories rose 0.8%.

The growing goods trade deficit suggests that in August imports expanded at a pace considerably above that of exports. Within the national accounts, a larger trade deficit can be a drag on measured GDP expansion because imports are deducted from total economic output, though the eventual effect on GDP will hinge on the full makeup of trade and other aspects of activity. Rising inventories send a separate signal: businesses kept adding to stock, but the monthly rate of accumulation moderated from July.

The international trade report monitors the dollar value of US exports and imports of goods and the resulting trade balance. A deficit indicates that the value of imports exceeds that of exports. Market participants watch the figures because net exports are part of GDP and shifts in trade flows can offer clues about domestic demand, foreign demand and overall economic momentum.

Wholesale and retail inventory figures capture the value of goods businesses hold at month-end, stripping out the effect of price changes in the estimates. Inventory shifts matter because firms adding to or running down stockpiles can sway quarterly growth calculations.