The United States trade deficit posted a sharp decline in October to $67.1 billion from the record $81.4 billion in September, according to data released by the U.S. Census Bureau on Tuesday.
The improvement was led by a surge in exports, which rose by $16.5 billion, or an 8.1% increase on the month, while imports were only $2.5 billion higher than September’s reading, a 0.9% increase.
This suggests an economic rebound in other countries as they demand more U.S. goods and services.
Inflation also contributed to stronger demand for U.S. goods as they became cheaper relative to foreign goods; the trade deficit data is based on dollar terms.
The largest increase in exports came from industrial supplies and materials like crude oil and nonmonetary gold, which rose by $6.4 billion on the month.
Exported services posted a steady increase of $1 billion in October as travel to the U.S. recovered for the second month in a row. We expect this number to increase in November with the lifting of the pandemic travel ban in early November.
Underneath the headline, the trade deficits with China and the European Union both decreased on the month by $3.2 billion and $1.6 billion.
The deficit with Mexico increased by $0.8 billion in October as the production of U.S. imported goods like automobiles started to come back online.
The takeaway
The strong rebound in trade will feed into gross domestic product growth in the last quarter of the year, increasing the chance of an upside surprise to growth, which is currently projected to be 5.6%.
