The U.S. trade deficit expanded in December, highlighting how a global economic slowdown remains a headwind to domestic growth.
The trade gap expanded 2.7% from the prior month to a seasonally adjusted $43.36 billion, the Commerce Department said Friday. Exports fell 0.3%, while imports increased 0.3%.
Economists surveyed by The Wall Street Journal expected a deficit of $43.5 billion in December.
November’s deficit was revised to $42.23 billion, from the previously estimated $42.37 billion.
For all of 2015, the U.S. trade deficit grew 4.6% from 2014. Exports fell 4.8% on the year. Imports declined 3.1% last year.
The reduced trade volumes demonstrate that the global economy cooled last year. That weakness could be spilling into 2016, reflected by financial market gyrations and falling commodity prices.
December’s level of goods exported was the lowest since February 2011. Shipments of food, civilian aircraft and petroleum all slipped during the month.
Falling exports is in part due to a stronger U.S. dollar, which makes American goods and services relatively more expensive overseas.
The dollar could strengthen further this year. The Federal Reserve is preparing to gradually increase interest rates, which should strengthen the dollar. Meanwhile, many central banks around the world are loosening monetary policy, pushing their currencies in the opposite direction.
Low commodities prices and a steep increase in domestic oil production during most of last year has slowed imports. Crude oil imports rose modestly in December from November, but were down by $120.5 billion during 2015. That figure is larger than the total decrease in goods imports last year.
The average price of a barrel of imported crude oil declined to $36.60 in December from $82.92 a year earlier.
The latest data on trade will be incorporated into the next broad reading of fourth-quarter economic output, due out later this month.
The Commerce Department’s initial reading on gross domestic product showed the economy expanded at a 0.7% annual pace during the fourth quarter. That was a sharp slowdown from the third quarter’s 2% expansion.
International trade was a 0.47 percentage point drag on overall growth last quarter.
America’s goods-trade deficit with many of its largest partners expanded last year.
The deficit with China grew 6.6%. The trade gap with the European Union expanded 7.9%. And the deficit with Mexico grew 8.4%.
The goods-trade gap with Canada, the largest U.S. trading partner and a major supplier of oil, decreased by 58%.
The United States already having a late deficit and the expectation that it will continue to grow through 2016 seems concerning. If the Fed continues to increase the rate strengthening the dollar, and other countries currencies devaluing we will have a problem. Will there be a way for the Fed to increase the rate while not causing a larger trade deficit?
ReplyDeleteThis is a perplexing multi-faceted question. As the Fed has already begun increasing the interest rates, it seems that relying on other nations to increase their exports. What is interesting to me is that the US has by far the largest trade deficit that is over 600 billion dollars greater than the second place United Kingdom. In a side-by-side comparison with the trade surplus category, Germany, at number 2 is much closer to the number 1 Saudi Arabia, lagging by roughly 40 billion dollars. It was fascinating to see the contrast between the two. Hence, one viable solution is to heavily encourage international trade, for the sake of the U.S. as well as the global economy.
ReplyDeleteI wonder how our trade gap with Canada will effect our economy. Most of our crude oil exports go to Canada. If Canada is importing less oil from our country, I wonder if our country will begin exporting refined oil to other nations. I believe we must do this in order to revive our trade gap.
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