Wider U.S. trade deficit, weak exports point to slower growth

Tue Nov 4, 2014 1:11pm EST
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By Lucia Mutikani

WASHINGTON (Reuters) - The U.S. trade deficit unexpectedly widened in September as exports hit a five-month low, a sign that slowing global demand could undercut economic growth in the fourth quarter.

The Commerce Department said on Tuesday the trade gap increased 7.6 percent to $43.03 billion, ending four straight months in which the deficit had narrowed.

"We expect a stronger dollar and weaker growth abroad, most notably in Europe, will take a greater toll on the trade balance and overall growth in the economy," said Diane Swonk, chief economist at Mesirow Financial in Chicago.

September's shortfall was bigger than the $38.1 billion gap the government had assumed in is estimate of third-quarter GDP last week, when it said the economy expanded at a 3.5 percent annual rate, with trade adding 1.3 percentage points.

Economists, who had expected a $40.00 billion trade gap in September, said the wider deficit could cut as much as a half a percentage point off that growth estimate. That would come on top of a reduction of about two-tenths of a point due to weak construction spending data released on Monday, they said.

The government will publish revisions to third-quarter GDP later this month.

In another report, the Commerce Department said orders for factory goods fell for a second straight month in September. Relatively firm domestic demand, however, is expected to keep U.S. factories humming.

While the trade data had little impact on U.S. financial markets, concerns about weakening global demand pushed Brent crude oil prices to the lowest level in more than four years, dragging down U.S. stocks. The dollar fell against a basket of currencies, while prices for U.S. Treasury debt rose.   Continued...

Cargo containers are ready for transportation at the Port of Los Angeles October 27, 2014. REUTERS/Bob Riha Jr.