US trade gap widens as exports of soybeans, other products drop | The Daily Star
12:00 AM, December 08, 2016 / LAST MODIFIED: 12:00 AM, December 08, 2016

US trade gap widens as exports of soybeans, other products drop

The US trade deficit recorded its biggest increase in more than 1-1/2 years in October as exports of soybeans and other products fell, suggesting trade would be a drag on growth in the fourth quarter.

The Commerce Department said on Tuesday the trade gap rose 17.8 percent, the largest increase since March 2015, to $42.6 billion. Higher imports due to rising domestic demand also contributed to the widening of the deficit.

When adjusted for inflation, the deficit rose to $60.3 billion from $54.2 billion in September.

"This widening of the trade deficit at the start of the fourth quarter puts trade on track to subtract a little more than one percentage point from fourth-quarter GDP growth," said John Ryding, chief economist at RDQ Economics in New York.

Exports contributed 0.87 percentage point to the third quarter's 3.2 percent annualized rate of increase in gross domestic product. The jump in exports in the last quarter largely reflected a surge in soybean shipments to China after a poor harvest in Argentina and Brazil.

While the reversal in soybean shipments, which is weighing on exports, suggests trade is likely to subtract from GDP growth in the fourth quarter, consumer spending and a firming housing market are expected to keep supporting the economy.

Rising gas and oil well drilling in response to increasing oil prices is also expected to boost growth this quarter by stimulating demand for manufactured goods such as machinery.

Firming oil prices are starting to have an impact on manufacturing. A second report from the Commerce Department on Tuesday showed new orders for manufactured goods rose 2.7 percent in October after increasing 0.6 percent in September.

That was the largest increase since June 2015 and marked four straight months of gains. Unfilled orders at factories increased 0.7 percent, the biggest rise since July 2014, ending four consecutive months of decline.

The report pointed to an upturn in manufacturing, which accounts for about 12 percent of the economy, after a prolonged slump that helped to erode economic growth. But factory inventories were flat, suggesting a moderate pace of inventory accumulation this quarter.

Following the trade and factory orders reports, the Atlanta Federal Reserve cut its fourth-quarter gross domestic product estimate by three-tenths of a percentage point to a 2.9 percent rate.

Stay updated on the go with The Daily Star News App. Click here to download it for your device.

Grameenphone and Robi:
Type START <space> BR and send SMS it to 2222

Type START <space> BR and send SMS it to 2225

Leave your comments

Top News

Top News