"There is a double whammy here - one of the strong Dollar, and it is happening in an environment where global demand is weak."
- TD Securities
The US trade deficit widened in August by the most in five months, as imports picked up and weaker overseas growth limited sales to customers abroad. According to Commerce Department, the gap increased 15.6% year-on-year to $48.3 billion in the reported month, following a revised $41.8 billion in July. Meanwhile, imports rose 1.2% in August to $233.4 billion from $230.6 billion in the prior month. At the same time, US exports decreased 2% to $185.1 billion in August. The widening trade gap with other nations revealed the US economy's vulnerabilities to a strong Dollar and weak demand in foreign markets, which could impose further caution on the Federal Reserve's plans to hike interest rates.
At the same time, Federal Reserve Bank of San Francisco President John Williams expects the regulator to start normalising monetary policy in 2015, despite weak job growth numbers observed earlier last week. However, he declined to comment, whether a hike will already occur in October or the Fed will wait for two more months. Williams noted that by adding 150,000 jobs every month over the medium term, the US would eventually reach the unemployment rate of 3% in the long run. He underlined that it is normal to estimate further payroll gains of less than 200,000 per month.
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