Trade Deficit Continues To Widen

The nation's trade deficit continued to widen in September, to $54.0 billion vs $53.3 and $50.0 billion in the prior two months. September was actually a good month for exports, jumping 1.5 percent to $212.6 billion in a gain, however, offset by a 1.5 percent increase in imports to $266.6 billion.

First the good news and that's a strong showing for aircraft exports that lifted capital goods by $1.1 billion to $47.5 billion in the month. Exports of industrial supplies were also strong, up $2.8 billion to $46.9 billion. These gains helped offset a sharp $1.0 billion decline in food exports to $11.0 billion in what may likely reflect early tariff effects.

Now the news on imports where consumer goods rose $2.0 billion in the month to $55.4 billion in what highlights the center of the trade controversy. Imports of capital goods were also higher, up $2.4 billion to $60.1 billion, but imports here point to solid business investment which will help the nation's productivity.

Looking at unadjusted data by nation, the trade deficit with China widened to $40.2 billion in September from an already steep $38.6 billion in August. The gaps with all other leading trading partners narrowed in the month especially with the EU, down to $10.6 billion from $15.7 billion.

Going into what looks like building drama for trade talks, the nation's trade deficit was going in the wrong direction. Net exports proved very weak in the third quarter with the outlook for the fourth quarter uncertain.