The numbers: The U.S. trade deficit climbed almost 5% in September to $61.5 billion, but it remained near a three-year low and was on track to post the smallest increase since 2020.
Smaller deficits add to gross domestic product, the official scorecard for the U.S. economy. GDP grew at a rapid 4.9% pace in the third quarter.
Key details: Imports rose 2.7% to $322.7 billion in September, the government said Tuesday.
That’s the highest level since February and partly reflects U.S. companies stocking up ahead of the holiday shopping season. Imports of cell phones and other consumer goods increased sharply.
Exports moved up a smaller 2.2% last month to $261.1 billion, just a hair below an all-time high.
Weak economic growth in much of the world has curbed demand for many American-made goods, but U.S. shipments of autos, passenger planes and Covid-related medicines have helped to keep exports high.
The rising value of the dollar, however, could pinch exports in the months ahead by making them more expensive for foreign customers to purchase.
Big picture: The deficit is on track in 2023 to be the lowest in three years, but the U.S. is still running historically high trade gaps.
A big part of the reason has been the strong U.S. economic recovery since the pandemic. Americans can afford to buy more foreign imports such as iPhones, clothes and spirits.
Yet if the economy slows and Americans can’t afford to buy as many imports, a falling trade deficit would actually be a sign of deteriorating U.S. conditions.
“Our view that consumption growth is likely to slow sharply, as weaker real income growth and rising borrowing costs take their toll, implies that import growth will moderate again soon,” deputy chief U.S. economist Andrew Hunter of Capital Economics wrote in a note to clients.
“The recent upturn in exports has been harder to explain, but with most other advanced economies seemingly on the cusp of recession while growth in China falters again, it also looks unlikely to last.”