The U.S. trade deficit narrowed a little to US$38 billion in September, from a revised record of US$38.3 billion in August.

RBC Financial Group economists say that the report is moderately worse than consensus expectations. Both exports and imports were lower in the month. “This report keeps up the pressure on the U.S. dollar topping out against most major currencies into next year driven by growing concerns about the U.S. economy’s ability to attract the global capital inflows that are necessary to continually support a large trade deficit without requiring a shock to the currency and/or financial asset prices,” it says.

BMO Nesbitt Burns says that work slowdowns at west coast ports weighed on imports, offsetting any increased ordering prior to the labour action. “The port dispute likely helped trim the trade deficit with China, which narrowed to $10.3 billion from the record $10.9 billion in August, as imports of consumer goods fell 1.4%, led by a 7.3% decrease in televisions, and a 6.5% drop in toys.”

For the third quarter, the U.S. trade deficit was a record $111.4 billion. “However, this was narrower than that assumed in the Q3 GDP report, suggesting that an upward revision to growth last quarter is likely,” says Nesbitt. “The U.S. trade deficit remains near record levels, as a softening in domestic demand is offset by a slowdown in global growth. As well, still-high oil prices and inventory rebuilding will keep the trade imbalance under pressure through the fourth quarter.”

“The trade deficit looks a bit narrower than assumed in the Q3 GDP results, and the September business inventory data were also stronger than assumed in the 3.1% growth tally. All told, the new data should push the third quarter real GDP growth rate closer to 4%,” concludes CIBC World Markets. “But to some extent, particularly in the case of inventories, that will come at the expense of Q4 output. October’s trade deficit could narrow even further given port strike impacts, which will hit imports more than exports, but the balance of the quarter will see a sharp reversal in the other direction as the transport system clears out the backlog.”