Quiver Quantitative - In an unexpected turn of events, the U.S. trade deficit narrowed in November, primarily due to a significant drop in consumer goods imports, reaching a one-year low. This decline is attributed to slowing domestic demand, a trend that could neutralize trade's impact on economic growth in the fourth quarter. The Commerce Department's report also revealed that exports fell in November, pointing to a global slowdown in demand following substantial interest rate hikes by central banks, including the Federal Reserve, since 2022. These developments have led to a contraction of 2.0% in the trade deficit, bringing it down to $63.2 billion.
The decrease in imports was noteworthy, declining 1.9% to $316.9 billion, with goods imports dropping 2.3% to $257.4 billion. Consumer goods imports led this decline, falling by $4.1 billion. This was largely driven by a decrease in cell phones and other household goods. Meanwhile, crude oil imports saw a rise of $1.5 billion. On the other hand, capital goods imports declined, suggesting continued weak business spending on equipment. Conversely, exports also decreased by 1.9%, with goods exports falling to $168.0 billion due to lower shipments of industrial supplies and materials, including crude oil.
Market Overview: -US trade gap unexpectedly narrows as consumer goods imports plummet to a year-long low, reflecting slowing domestic and global demand. -Exports also dip on weaker overseas appetite, potentially signaling a muted trade impact on Q4 GDP. -Dollar rises, while stocks and US Treasuries edge lower as economic data paints a mixed picture.
Key Points: -November trade deficit contracts 2.0% to $63.2 billion, defying projections of continued widening. -Imports slide 1.9%, led by a $4.1 billion drop in consumer goods, indicating domestic spending headwinds. -Exports decline 1.9%, though record-high services exports provide a glimmer of hope.
Looking Ahead: -Data raises questions about the pace of global economic recovery and its impact on US trade. -Focus shifts to December trade figures and Q4 GDP release for further clues about the economy's trajectory. -Despite moderation in trade flows, broader concerns about slowing demand and potential disruptions like Red Sea (NYSE:SE) attacks remain paramount.
The goods trade deficit saw a slight contraction, narrowing 0.6% to $89.4 billion. When adjusted for inflation, the goods trade deficit contracted more significantly by 2.7% to $84.8 billion. This real goods trade deficit is averaging around $86.0 billion in the fourth quarter, roughly consistent with the third quarter. Before this data release, economists had anticipated a minor drag on GDP from trade for the fourth quarter. However, Goldman Sachs (NYSE:GS) economists have now revised their GDP growth estimate upwards for the quarter, reflecting the impact of the Federal Reserve's interest rate hikes and businesses' anticipations of slower demand.
The trade deficit with China also saw a reduction, falling $2.4 billion to $21.5 billion, with a noticeable decline in Chinese imports. Despite potential disruptions in the Red Sea and the Panama Canal impacting shipping routes and costs, economists expect a modest impact on U.S. trade. Interestingly, services exports reached a record high of $85.7 billion, driven by increases in travel, business services, and transport. The services surplus hit its highest level since March 2018, standing at $26.2 billion, reflecting the evolving dynamics of U.S. trade.
This article was originally published on Quiver Quantitative