Growth slows to 2% or lower

The third quarter is shaping up to be a soft one in the United States.

A new advance report on the US trade balance was released on Tuesday and showed exports falling the most in 7 months. The deficit rose 13.4% to $67.2 billion compared to $59.2 billion the month before.

It was only the second time the 'advance' trade balance report has been released. It only measures trade in goods. Exports fell 3.5% led by sales of industrial supplies.

Economists at Morgan Stanley were surprised by the report and said it will sap 1 percentage point from Q3 growth compared to assumptions that trade would add 0.1 pp in the quarter.

Barclays lowered its quarterly growth estimate to 1.6% and TD trimmed it to 2.0% from 2.5%. Others may wait until the full report is released on October 6. At the moment, the current consensus is for a $41.65 billion deficit. Services exports usually register around an $11 billion surplus so that would $55 billion.

At the moment this report is underrated because it's new but if it holds up then it means significantly slower growth and likely spells the end of liftoff talk for October.