U.S. trade deficit jumps to record high in September

U.S. trade deficit jumps to record high in September

The U.S. trade deficit jumped to a record high in September as exports slumped, government data showed on Thursday. The Commerce Department said that the trade gap surged 11.2% to a record $80.9 billion. Economists polled by Reuters had forecast an $80.5 billion deficit. Exports tumbled 3.0% to $207.6 billion in September. (Reuters)

Our View

The US trade deficit rose to an all-time high of -USD80.9b in Sep-21 (Aug-21: -USD72.8b), attributable to both the increase in imports (+0.6%mom) and reduction in exports (-3%mom) from the previous month. Compared to the same period last year, exports sustained double-digit growth for the sixth straight month albeit at a slower pace of 16.6%yoy (Aug-21: 22.8%yoy).

The sales of capital goods; automotive vehicles, parts, & engines; and industrial supplies and materials, notably products such as nonmonetary gold, crude oil, and semiconductors, among others, declined during the month.

However, higher shipments of consumer goods contributed to the sustained growth in exports. By destination, exports to Malaysia (31.3%yoy), Japan (23.9%yoy), and India (51.7%yoy) grew at a double-digit pace while shipments to China (-5.1%yoy) and the UK (-4.2%yoy) declined. On the other hand, the level of overall imports reached a new high of USD288.5b.

The 19.9%yoy rise in the September imports was mainly driven by the increased purchases of capital goods and industrial supplies & materials. By source, the inbound shipments from Hong Kong (1.2%yoy), Malaysia (10.7%yoy), and the UK (15%yoy), grew at a softer rate while those from China (15.1%yoy) accelerated.

With the downward trend in the daily domestic Covid-19 cases as well as the rising wages, we anticipate the recovery in domestic consumption will support the US economic recovery as well as the imports outlook in the coming months.

However, the ongoing supply constraints such as the logistic delays and shortages of materials continue to affect growth in production and trade activity.

The latest IHS Manufacturing PMI indicated that the rate of expansion in the US factory activities moderated in Oct-21 (58.4; Sep-21: 60.7), with output and export orders growing at a marginal pace while the growth in new orders expanded.

Analysis by MIDF Research