U.S. Trade Deficit Widened Much More Than Expected in December

The U.S. trade deficit in goods and services (BOP basis) widened to $70.3 billion in December from a downwardly revised $53.0 billion in November (previously $56.8 billion), according to the U.S. Census Bureau. The goods deficit increased markedly to $99.3 billion from a downwardly revised $83.6 billion in November (previously $86.9 billion) while the services surplus narrowed slightly to $29.0 billion from $30.6 billion (previously $30.1 billion). The Action Economics Forecast Survey looked for a deficit of $55.5 billion.

The real (inflation-adjusted) trade deficit in goods widened to $97.1 billion (2017$) in December from $84.5 billion in November (previously $87.1 billion). However, for all of the fourth quarter, the real deficit narrowed to $245.0 billion from $261.6 billion in Q3. This suggests that trade contributed around 0.5%-point to overall GDP growth in Q4. Q4 GDP will be released tomorrow, December 20.

Exports of goods and services fell 1.7% m/m (+6.3% y/y) in December on top of a 3.4% monthly decline in November. Goods exports (Census basis) dropped 3.0% m/m in December following a 5.2% m/m decline in November. The December decline was led by a 14.5% m/m fall in exports of “other goods,” the fourth monthly decline in five months. Exports of industrial supplies and materials slumped 12.3% m/m on top of an 8.0% m/m decline in November. The $8.7-billion December drop in industrial supplies exports was almost completely accounted for by a $7.1 billion decline in nonmonetary gold exports. By contrast, exports of nonfood consumer goods excluding autos jumped 8.4% m/m in December and capital goods exports gained 4.2% m/m. Exports of services increased 0.4% m/m in December after a 0.2% monthly decline in November. The December gain was led by a 2.5% m/m increase in travel exports and a 1.6% m/m rise in transport exports.

Imports of goods and services increased 3.6% m/m (-2.6% y/y) in December on top of a 4.2% monthly jump in November. Goods imports (Census basis) rose 3.8% m/m on top of a 5.8% monthly jump in November. Imports of industrial supplies surged 15.9% m/m in December, more than reversing a 5.6% m/m decline in November. Capital goods imports increased 5.5% m/m, their third consecutive solid monthly gain. Auto imports rose 3.9% m/m in December, the first monthly increase in four months. By contrast, imports of nonfood consumer goods excluding autos fell 5.9% m/m, but this was after a 15.6% m/m surge in November. Imports of services rebounded in December, rising 2.7% m/m following a 1.3% m/m decline in November. Transport imports jumped 12.1% m/m, their first monthly gain in three months. Travel imports rose 2.4% m/m following a 1.6% monthly decline in November.

By country, the goods trade deficit with China narrowed to $12.4 billion in December from $14.4 billion in November. Exports to China rebounded in December, surging 26.5% m/m after slumping 20.1% m/m in November. Imports from China declined 2.0% m/m in December on top of 4.1% monthly decline in November. This was their fourth monthly decline in the past five months. The trade deficit with the European Union narrowed to $11.1 billion from $14.3 billion in November. The deficit with Japan widened to $5.3 billion from $4.7 billion in November.

The international trade data can be found in Haver’s USECON database. Detailed figures on international trade are available in the USINT and USTRADE databases. The expectations figures are from the Action Economics Forecast Survey in AS1REPNA.