The advance report on international trade in goods only showed exports falling 1.6% in September while imports of goods were down 2.3%. The balance of goods was a deficit of $70.4 billion, the smallest since $69.4 billion in June 2018. While in some respects a narrower trade deficit on goods is a positive for GDP with less drag in net exports — provided the surplus for services doesn’t change the story significantly — less demand for US goods abroad is not good news for the manufacturing sector. Additionally, the decline in imports suggests that US businesses were not stocking up in advance of the holiday shopping season, in part to avoid excess inventories should consumer spending disappoint, and part because of unsettled trade policy. Some purchases of imports may have been delayed in the hope that an agreement with China would be reached and allow a little late season stocking up when the situation was clearer.
Nonetheless, advance data for retail inventories was up 0.3% in September after down 0.2% in in August. Wholesaler inventories were down 0.3% after no change in the prior month. The factory inventory component will not be reported until Monday, November 4 at 10:00 ET. However, it is not expected to provide any support to inventory growth with conditions in manufacturing so soft at present.
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