Trade Deficit in U.S. Widens as Services Imports Rise to Record

The U.S. trade deficit unexpectedly widened in August, as higher imports of capital goods and record purchases of services from abroad overshadowed a gain in exports.

The gap grew by 3 percent from the prior month to $40.7 billion, Commerce Department figures showed Wednesday in Washington. The median forecast in a Bloomberg survey of economists called for a deficit of $39.2 billion.

Imports posted a 1.2 percent rise, while exports increased 0.8 percent.

Services imports jumped by $1.5 billion to $43 billion, with most of the rise coming from charges for use of intellectual property that may reflect a temporary boost from rights fees to broadcast the Olympic Games.

Improvement in global markets and the dissipating effect of the strong dollar are likely to aid exports and help the expansion in the world’s largest economy.

“We anticipate a further pickup in exports,” Jennifer Lee, a senior economist at BMO Capital Markets in Toronto, said before the report. “On balance, that will be supporting U.S. growth in the third quarter.”

Bloomberg survey estimates for the trade deficit ranged from $37 billion to $44 billion. The $39.5 billion shortfall for July was unrevised by the Commerce Department.

Exports increased to $187.9 billion on sales of consumer goods including pharmaceuticals as well as industrial supplies, the report showed.

Imports gained to $228.6 billion, up from $225.9 billion in the prior month. In addition to services, purchases increased for foods and capital goods such as aircraft and telecommunications equipment made abroad.

Olympics Quirk

One quirk in August was the rise in service imports related to the Olympic Games held that month in Brazil, which provided a one-time boost that will disappear in the September trade numbers, according to economists at firms including Action Economics LLC and Moody’s Analytics Inc.

The report showed that charges for the use of intellectual property jumped to $4.5 billion in August, the highest since at least 2014, from $3.3 billion in July.

“Rights to broadcast the Summer Olympics will boost royalties and license fees, captured in imports of intellectual property,” Ryan Sweet of Moody’s wrote in a note before Wednesday’s report. As other recent Summer Olympics occurred in August, the increase will be “isolated to that month,” he said.

Excluding petroleum, the trade shortfall widened to $35.3 billion from July’s $34.6 billion.

After eliminating the influence of prices, which renders the numbers used to calculate gross domestic product, the trade deficit shrank to $57.5 billion from $58.2 billion. The average gap for July and August is below the $60.9 billion for the full second quarter, indicating trade is on track to add to GDP growth in the third quarter.

Figures released last week showed that the economy expanded more in the second quarter than previously estimated, with net exports adding 0.18 percentage point to growth and business spending posing a smaller drag.
The goods-trade gap with China, before seasonal adjustments, widened to $33.9 billion in August from $30.3 billion as exports were little changed while imports climbed. The trade deficits with Europe, Canada and Mexico also grew.

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