US: Trade to remain drag on US growth – Wells Fargo

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The US trade deficit was $55.5 billion. Analysts at Wells Fargo, point out exports saw a modest 0.1% decline, while imports rose 0.2% over the month. Trade is poised to weigh on growth in coming quarters, analysts expect. 

Key Quotes: 

“Data released this morning shows that the U.S. trade deficit widened to $55.5 billion in October, from $54.6 billion in September. The increase in red ink came as exports of goods and services dropped by $300 million and imports rose by $600 million.”

“The trade-weighted value of the U.S. dollar against other major currencies has risen about 5% since the beginning of the year. All else equal, this makes exports relatively more expensive for our foreign trading partners. Despite the strong performance, we expect that the greenback will eventually reverse trend and begin to depreciate for the majority of 2019, which may be more supportive of export growth.”

“On the other side of the ledger, strong consumer demand continued to pull in imports, with consumer goods and automobiles leading import growth.”

“Trade-related distortions caused net exports to contribute 1.2 percentage points to GDP growth in Q2, but net exports took back 1.9 percentage points from growth in Q3. Although we expect that the drag will lessen going forward, we look for net exports to exert modest headwinds on overall GDP growth in coming quarters.”
 

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