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US trade deficit widens as Olympics drive imports higher

Washington - The US 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% from the prior month to $40.7bn, Commerce Department figures showed on Wednesday in Washington. The median forecast in a Bloomberg survey of economists called for a deficit of $39.2bn. Imports posted a 1.2% rise, while exports increased 0.8%.

Services imports jumped by $1.5bn to $43bn, with most of the rise coming from charges for use of intellectual property that probably 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.

“The trade deficit looks like it’ll provide a pretty big boost to the third quarter,” said Sam Coffin, an economist at UBS Securities LLC in New York, who projected the gap would widen. “The general story is improving exports.”

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

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

Imports gained to $228.6bn, up from $225.9bn 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 and Moody’s Analytics.

The report showed that charges for the use of intellectual property jumped to $4.5bn in August, the highest on record, from $3.3bn in July. Previous spikes also occurred in months featuring the winter or summer Olympics, historical data show.

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

After eliminating the influence of prices, which renders the numbers used to calculate gross domestic product, the trade deficit shrank to $57.5bn from $58.2bn. The average gap for July and August is below the $60.9bn 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 $33.9bn in August from $30.3bn as exports were little changed while imports climbed. The trade deficits with Europe, Canada and Mexico also grew.

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