In August, the US trade deficit in goods narrowed amid a fall in imports, driven by decreasing domestic demand as the Federal Reserve tightens monetary policy to curb inflation. On Wednesday, the report from the Commerce Department said that trade would again contribute to gross domestic product (GDP) in the third quarter. Also, the economy could also get a lift from big gains in wholesale and retail inventories last month.

The goods trade deficit contracted 3.2 per cent to USD 87.3 billion last month, the smallest since October 2021. Imports of goods fell USD 4.6 billion to USD 267.1 billion. There was a 6.9 per cent drop in imports of industrial supplies, which include petroleum.

Imports of capital goods fell 1.8 per cent, while those of consumer goods declined 0.2 per cent. However, there were increases in imports of food, motor vehicles and other goods, which stimulated retail inventories.

Goods exports dropped USD 1.7 billion to USD 179.8 billion. The decline in exports was led by motor vehicles, which plunged 8.9 per cent. Exports of industrial supplies dropped 3.5 per cent. However, exports of consumer goods rose 8.0 per cent. There were also surges in exports of capital, food and other goods.
Moderate consumer spending and record exports were the only bright spots in the economy in the second quarter.

The economy contracted at a 0.6 per cent annualised rate last quarter. That followed a 1.6 per cent pace of fall in GDP in the January-March quarter. Growth forecasts for the third quarter are below a 1.5 per cent rate, with a big drag from housing anticipated.
As per the data, motor vehicle inventories shot up 3.7 per cent after rising 3.5 per cent in the previous month. Retail inventories surged 0.6 per cent after gaining 0.3 per cent in July.