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On the radar: Advance report on trade in goods, retail and wholesale inventories provide a sneak peak at 4Q GDP net exports and change in inventories

The October advance report on international trade in goods only, and for retail and wholesale inventories provided a sneak peak at how two components of GDP may shape up for the fourth quarter. One month’s data really isn’t enough to make a solid determination, but with worries about growth in the fourth quarter softening notably from the third quarter, the early GDP nowcasts could see some upward revision from the anemic 0.7% in the New York Fed’s Nowcast and the up 0.4% in the Atlanta Fed’s GDPnow.

The trade deficit on goods narrowed to $66.5 billion seasonally adjusted in October, the smallest since $66.7 billion in May 2018. Exports were down 0.7% for goods, while imports were down 2.4% for imports. This would hint that net exports are going to be less of a drag in the fourth quarter. However, it also suggests that the improvement comes at the cost of less trade activity overall.

Advance data on retail inventories in October showed an increase of 0.3% from September and wholesale inventories also were up 0.3%. Inventories for manufacturers won’t be reported until the release of the factory order data at 10:00 ET on Thursday, December 5. Recessionary conditions in the factory sector probably mean that inventories will rise little, if at all for October.

With 2/3 of the sectors reporting higher, however, it is possible that the change in private inventories will also make a positive contribution to fourth quarter GDP.


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