Home / News / World /  US trade deficit narrows for a fifth month to smallest in a year

The US trade deficit dropped to its lowest level in more than a year in August as slowing domestic demand amid stiff interest rate increases from the Federal Reserve weighed on imports.

The trade deficit narrowed by $3.1 billion to 4.3 per cent to $67.4 billion last month, the lowest level since May 2021, the Commerce Department said on Wednesday.

The value of goods and services declined 1.1% to $326.3 billion, while exports eased 0.3% to $258.9 billion

A shift in consumer spending patterns that favors services and experiences -- and comes at the expense of merchandise -- is helping temper demand for products made overseas. Furthermore, some retailers have reported canceling and reducing orders to bring inventories more in line with sales.

Meanwhile, external demand for US goods and services remains soft as economies in much of the world struggle for momentum against a backdrop of rising interest rates and high inflation. A soaring dollar is also making US goods more expensive for overseas customers.

On an inflation-adjusted basis, the August merchandise trade deficit shrank to about $99 billion, the smallest since January of 2021.

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