for Second Straight Month in October

• The goods trade deficit widened sharply in October to $99 billion from $91.9 billion in September, according to the first estimate from the U.S. Department of Commerce.
• The value of nominal goods exports fell 2.6% on a month-over-month basis while nominal goods imports rose 0.9%.
  
• Trade will likely be a drag on growth through 2022 and in 2023.

The advance nominal-goods trade deficit in October widened for the second straight month. The goods trade deficit rose 7.7% last month to $99 billion, according to data from the U.S. Department of Commerce. This was worse than the consensus expectation for a narrowing to $90.6 billion. Exports fell 2.6% in October while imports rose 0.9%.

Within exports, consumer goods and industrial supplies drove the decline in October. Consumer goods exports fell 9.4% and industrial supplies fell 4.7%, both from the prior month. Automotive exports rose 2.5% in October following a 5.1% increase in September.

Automotive imports were up 2.2% on the month and up 30% from a year ago. Industrial supplies imports rose 1.5% on the month and were up 13.1% from a year ago. Consumer goods imports fell 1.2% in October and were up 6.7% from a year ago.

The goods trade deficit peaked at $125.6 billion in March and declined for five straight months before the widening in September and October. The report from the Commerce department also showed a decrease in retail inventories in October. Retail inventories fell 0.2% in October but were up 21.1% from a year ago, indicating a pullback in consumer demand. Trade contributed to growth in the third quarter of this year and added 2.8 percentage points to net real GDP growth in the quarter.

Trade will likely be modestly negative for growth through the rest of the year and in 2023 as slowing global growth and a deteriorating global economic outlook weigh on exports. Risks to the trade outlook are tilted to the upside. A rapid recovery of supply chains will help exports, reducing the trade deficit.