U.S. Trade deficit widens in November on imports gain
The U.S. trade deficit increased to -$36.4 billion in November, outpacing market expectations for a smaller decline to -$34.6 billion. October’s deficit was revised to -$33.2 billion from an initially reported -$32.9 billion. Exports rose by 0.9% while imports surged 2.6% in November.
The U.S. trade deficit widened in November, with a seventh consecutive gain in exports (0.9%) offset by an even larger (2.6%) rise in imports. The rise in exports was relatively narrowly based with outsized gains in foods and feeds (16.6%) and autos (9.0%) largely offset by declines in industrial supplies (-1.9%), consumer goods (-5.2%) and other merchandise (-8.8%). The gain in imports was more broadly based with strong gains in industrial supplies (5.1%), capital goods (3.8%) and consumer goods (3.7%) being only partially offset by a 2.3% decline in food and feed imports. The real-goods balance widened to -$40.7 billion in November with a 1.8% rise in imports of non-petroleum products offsetting a 0.3% rise in non-petroleum exports.
In recent weeks, expectations for fourth quarter GDP growth have been buoyed by reports that manufacturing and wholesale inventories increased for the second month in a row in November, suggesting a sharp slowing in the pace of inventory liquidation in the quarter. Today’s trade report supports the argument that a portion of these inventory gains were likely the result of increased imports rather than increased domestic production; however, even with a likely offset from trade, it appears that GDP growth for the quarter could be closer to 4% than our current 3.4% forecast.
While indications of stronger-than-expected growth in the fourth quarter are encouraging, they are largely a reflection of stronger-than-expected inventory numbers with growth outside of this component likely to remain relatively subdued. As a result, we expect the Fed to remain cautious about tightening policy until the economic recovery is on more solid footing and the large build-up of economic slack evident in December’s 10.0% unemployment rate begins to dissipate. Our forecast assumes that the first increase in the Fed funds target from its current range of 0% to 0.25% will not be required until the fourth quarter of 2010.
Nathan Janzen, Economist, RBC Economics
Thanks
Paul Ink
The U.S. trade deficit increased to -$36.4 billion in November, outpacing market expectations for a smaller decline to -$34.6 billion. October’s deficit was revised to -$33.2 billion from an initially reported -$32.9 billion. Exports rose by 0.9% while imports surged 2.6% in November.
The U.S. trade deficit widened in November, with a seventh consecutive gain in exports (0.9%) offset by an even larger (2.6%) rise in imports. The rise in exports was relatively narrowly based with outsized gains in foods and feeds (16.6%) and autos (9.0%) largely offset by declines in industrial supplies (-1.9%), consumer goods (-5.2%) and other merchandise (-8.8%). The gain in imports was more broadly based with strong gains in industrial supplies (5.1%), capital goods (3.8%) and consumer goods (3.7%) being only partially offset by a 2.3% decline in food and feed imports. The real-goods balance widened to -$40.7 billion in November with a 1.8% rise in imports of non-petroleum products offsetting a 0.3% rise in non-petroleum exports.
In recent weeks, expectations for fourth quarter GDP growth have been buoyed by reports that manufacturing and wholesale inventories increased for the second month in a row in November, suggesting a sharp slowing in the pace of inventory liquidation in the quarter. Today’s trade report supports the argument that a portion of these inventory gains were likely the result of increased imports rather than increased domestic production; however, even with a likely offset from trade, it appears that GDP growth for the quarter could be closer to 4% than our current 3.4% forecast.
While indications of stronger-than-expected growth in the fourth quarter are encouraging, they are largely a reflection of stronger-than-expected inventory numbers with growth outside of this component likely to remain relatively subdued. As a result, we expect the Fed to remain cautious about tightening policy until the economic recovery is on more solid footing and the large build-up of economic slack evident in December’s 10.0% unemployment rate begins to dissipate. Our forecast assumes that the first increase in the Fed funds target from its current range of 0% to 0.25% will not be required until the fourth quarter of 2010.
Nathan Janzen, Economist, RBC Economics
Thanks
Paul Ink
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