Trade balance improves, but Q4 growth impact is limited
|Summary
October's trade deficit narrowed, but the nearly $30B narrowing overstates the expected impact on real GDP growth in Q4. The shift reflects investment-driven precious metals transfers which won't translate to as large of a boost to fourth quarter growth as the headline data imply.
Not this narrow
Today's release of October trade data brings a second consecutive monthly head-scratcher: despite expectations for a widening, the actual number once again showed a sharp narrowing in the trade deficit in October. One of the themes of our 2026 annual outlook dealt with our expectation for trade to be less of a disruptive factor in 2026. We still anticipate that will be the case, but the government is still getting caught up with economic indicators delayed during the shutdown, and we're still months away from our first look at 2026 trade flows.
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