The U.S. goods trade deficit surged to its highest level in two and a half years in September

The U.S. goods trade deficit climbed to a 2.5-year high in September, reaching $108.2 billion, according to the Commerce Department’s Bureau of Economic Analysis. This 14.9% increase, the largest monthly rise since March 2022, reflects a notable uptick in imports driven by robust domestic demand and inventory stockpiling by businesses.

Many companies accelerated imports due to concerns over potential supply chain disruptions from a dockworkers’ strike, which ultimately was short-lived. These factors have led some economists to adjust their projections for U.S. GDP growth in Q3 downward.

In September, goods imports rose by 3.8% to $282.4 billion, also marking a 2.5-year high. Imports saw gains across consumer goods, food products, and capital goods, with consumer goods jumping 5.8%. Increased imports of industrial supplies, including petroleum, as well as motor vehicles, engines, and parts, further contributed to the growth.

While these imports helped bolster retail inventories, this buildup may reduce trade’s impact on GDP. In contrast, goods exports declined by 2.0% to $174.2 billion, with a notable 6.3% drop in consumer goods shipments, though food product exports rose by 4.8%.

Wholesale inventories saw a slight dip of 0.1%, while retail inventories rose by 0.8%, driven largely by a 2.1% increase in motor vehicles and parts inventories.

Economists estimate that the U.S. economy grew at an annualized rate of 3.0% in the third quarter, consistent with Q2 growth, despite trade’s likely negative effect on GDP. The government’s preliminary GDP estimate for Q3, expected Wednesday, is anticipated to confirm that trade has acted as a drag on economic growth for the third consecutive quarter.