Key Highlights

● The September goods trade deficit was wider than expected.

● A bigger deficit generally subtracts from GDP growth.

● Rising wholesale inventories could partly offset the drag.

● Strong domestic demand can itself widen the trade gap.

On a day dominated by the Federal Reserve, one economic release got less attention than it might have otherwise, as the advance goods trade deficit for September widened to a level larger than economists had expected, according to data released the same day. The report landed hours before the Fed announced it would leave its benchmark rate range unchanged.

For economists trying to pin down how fast the economy grew in the third quarter, it was an important piece of the puzzle, since the goods trade deficit measures how much more the US imports in physical goods than it exports.

Why the Trade Gap Matters for Growth

In the math of gross domestic product, net exports count toward growth, so a wider deficit generally subtracts from GDP, making the timing notable just ahead of the government's advance estimate of third-quarter GDP.

The other data released the same day offered a partial offset, as wholesale inventories rose by more than forecast, and inventory building adds to GDP, leaving economists to weigh both pieces as they fine-tune their estimates.

A Strong Economy by Most Measures

Even with the trade drag, the broader picture points to robust growth, with the Atlanta Fed's GDPNow model signaling a strong third quarter, its strongest reading in a year, and the Fed's own statement saying economic activity is expanding at a strong pace.

Strong domestic demand can itself widen the trade deficit, since when American consumers and businesses are spending freely, they buy more imported goods, meaning a bigger gap can reflect a healthy economy rather than a weak one.