Exports Show Weakness, Limited Results For Imports

Sharp improvement in agricultural exports is an isolated highlight of an otherwise subdued August report on goods trade that shows continued weakness overall for exports and limited results for imports. August's goods deficit totaled $72.8 billion which is slightly better than Econoday's consensus for $73.4 billion and hints at possible improvement for third-quarter net exports. Yet exports overall managed only a 0.1 percent gain in the month with the year-on-year rate in the negative column at minus 0.3 percent. Imports did rise 0.3 percent in the month to reverse the prior month's 0.3 percent decline but this yearly rate is also in the negative column at minus 1.3 percent.

Exports of foods, feeds & beverages jumped 4.2 percent in the month to lift this yearly rate to plus 8.4 percent in results that will raise talk of Chinese buying. Note that country breakdowns for August won't be available until next week's international trade report that will also include data on cross-border services trade. Exports of industrial supplies also rose in August as did vehicle exports, though exports of capital goods fell 3.1 percent in a negative sign for general business investment offset, however, by a 3.2 percent rise in imports of capital goods.

Outside of capital goods there's little sign that domestic demand is strengthening on the import side of the ledger that also shows sharp declines for industrial supplies and vehicles. Yet imports of consumer goods, which are the Achilles' heel for the US trade balance, did rise 2.6 percent in the month for a year-on-year gain of 6.5 percent.

Global trade has been slowing and may well be in contraction right now, a risk underscored convincingly by the year-on-year declines in both US imports and exports. The Federal Reserve is concentrated on the risk of slowing global growth, and this report offers arguments for the doves and their push for further rate cuts.