October 5, 2016 10:20 AM, EDT

Trade Deficit Widens as Olympics Drive Imports Higher

Luke Sharett/Bloomberg News

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% from the prior month to $40.7 billion, Commerce Department figures showed Oct. 5 in Washington. The median forecast in a Bloomberg survey of economists called for a deficit of $39.2 billion. Imports posted a 1.2% rise, while exports increased 0.8%.

Services imports jumped by $1.5 billion to $43 billion, 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 in New York, who projected the gap would widen. “The general story is improving exports.”

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 rose 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.

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 Inc.

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

Excluding petroleum, the trade shortfall widened to $35.3 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.