Wednesday, March 22, 2023
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Shrinking U.S. trade deficit to turn GDP positive again


The numbers: The trade deficit fell in August to a 15-month low of $67.4 billion, paving the way for a resumption of growth in U.S. gross domestic product in the third quarter.

The deficit narrowed 4.3% from $70.5 billion in July, the government said Wednesday. It was the fifth decline in a row.

Exports slipped 0.3% in August to a $258.9 billion. Imports dropped 1.1% to $326.3 billion.

Economists polled by The Wall Street Journal had forecast a deficit of $67.7 billion.

Big picture: The U.S. deficit has tumbled since peaking at a record $106.9 billion in March. Exports have risen and imports have declined, particularly because of falling oil prices.

Lower deficits add to GDP, the official scorecard of the economy. The shrinking trade gap is set to add a whopping 3 points to third-quarter GDP, the mirror opposite of what happened in the first quarter.

The result: GDP is set to rise for the first time in three quarters, ending at least for now any talk that the U.S. is already in recession.

Which way the trade deficit trends in the months ahead is less clear. A strong dollar is hurting U.S. exporters while a slowing economy could force Americans to reduce spending on imports even though they are cheaper to buy.

Market reaction: The Dow Jones Industrial Average

and S&P 500

were set to open lower in Wednesday trades following a two-day rally.


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