Sometimes a single month of data can completely rewrite the economic narrative. That's what happened when October's trade numbers hit: the U.S. deficit didn't just shrink, it collapsed to levels not seen since the financial crisis, and suddenly everyone's talking about 5% GDP growth.

The Atlanta Fed's GDPNow tracker, which updates its fourth-quarter growth estimate in real-time as new data arrives, rocketed from 2.7% to 5.4% annualized on January 8. That's the kind of number you'd expect during a post-pandemic bounce, not a mature expansion. In fact, outside of COVID recovery quarters, it would be the strongest growth since 1984.

What changed? Trade. Net exports went from subtracting from GDP to adding nearly 2.0 percentage points, according to the Atlanta Fed's calculations. That's a massive swing driven by one very weird month of trade data.

The Numbers Behind the Collapse

Thursday's report from the U.S. Census Bureau and Bureau of Economic Analysis showed the goods and services deficit shrank to $29.35 billion in October, down roughly 39% from September. Economists had expected $58.1 billion. Instead, they got the smallest deficit since mid-2009.

Exports rose 2.6% to $302.0 billion, while imports fell 3.2% to $331.4 billion. Almost the entire improvement came from goods rather than services. The goods deficit dropped $19.2 billion to $59.1 billion, while the services surplus edged slightly lower to $29.8 billion as government services exports softened.

What Actually Happened in October

Here's where it gets interesting. Goods exports climbed $7.1 billion to $195.9 billion, led by a $10.2 billion surge in industrial supplies and materials. Non-monetary gold exports alone jumped $6.8 billion. Meanwhile, consumer goods and pharmaceutical exports actually declined.

On the import side, goods imports fell $12.1 billion to $255.0 billion. The big drops? Pharmaceutical preparations tumbled $14.3 billion and consumer goods fell $14.0 billion. These declines more than offset rising imports of capital goods like computers and telecommunications equipment.

In real inflation-adjusted terms, the story is even more dramatic. The real goods deficit shrank nearly 20% in October, as real imports fell faster than real exports.

Country-level data reveals some curious shifts. The U.S. posted sharply larger surpluses with the United Kingdom and Switzerland, while deficits widened with Taiwan and Vietnam, suggesting supply chain realignments and changing technology import patterns. The most striking single-country move: the deficit with Ireland plunged $15.1 billion in one month due to collapsing pharmaceutical imports.

The Bigger Picture

Before anyone gets too excited, it's worth noting that October looks like an outlier. Year-to-date figures tell a different story: the overall goods and services deficit remains 7.7% higher than in 2024, with imports rising faster than exports over the full year.

The composition of October's data raises questions about sustainability. When your export surge is driven by non-monetary gold and your import drop is dominated by a pharmaceutical anomaly in Ireland, you're probably not looking at the start of a trend.

Supreme Court Decision Looms

All of this is happening against the backdrop of President Donald Trump's tariff policies, and the legal foundation for those tariffs faces a critical test Friday. The U.S. Supreme Court is scheduled to rule on whether the administration exceeded its statutory powers in imposing broad import duties under emergency executive authority.

According to Polymarket, prediction markets are pricing in only a 23% chance the Court rules in favor of Trump's tariffs, suggesting significant legal uncertainty around the trade policies that may have contributed to October's unusual numbers.

Whether October represents a genuine shift in trade dynamics or just a statistical quirk will become clearer in the months ahead. For now, it's given the GDP forecasters something to talk about besides consumer spending and labor markets.