The U.S. trade gap narrowed in October, easing to a deficit of $40.6 billion. That was moderately below the upwardly revised September figure of $43.0 billion. Initially, the September shortfall had been estimated at $41.8 billion. Estimates had been that the October deficit would have eased to $40.4 billion, or just about where the actual figure came in.
Breaking the report down, we see that exports in October came to $192.7 billion, while imports totaled $233.3 billion. The export total was $3.4 billion above the September figure; imports increased by just $1.0 billion in October.
Meanwhile, the September-to-October increase in exports reflected gains in industrial supplies and materials, consumer goods, and foods, feeds, and beverages. A decrease occurred in automotive vehicles, parts, and engines.
The increase in October imports also reflected a greater level of industrial supplies and materials and consumer goods. There likewise was a lesser rate of auto imports.
Looking at the October deficit of $40.6 billion on a comparable basis, this total, albeit down from September, was still the second largest trade gap since May. It also was well up from the low-water market of $34.6 billion recorded in June.
Looked at as a whole, this was a decent report, but it is unlikely to influence the Federal Reserve as it prepares for its December 17th and 18th Federal Open Market Committee meeting. In fact, two other reports, due out within the hour on non-manufacturing activity and new home sales, will have a greater impact. Later on today, we also will get a look at some early Fed thinking when it issues its Beige Book economic summation. Finally, a private-sector payroll report issued earlier this morning showed a larger-than-forecast increase in jobs created last month. That may not sit well with the Fed.
For now, we think there is about an even chance that the central bank will opt to do some modest tapering of its highly popular bond-buying program. It should be noted, though, that recent metrics have been stronger-than-expected on average, so the odds may well be shifting in favor of some contraction in bond buying. Rising bond yields tend to confirm this possible shift.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.