US goods trade deficit narrows to smallest level in two years

THE US merchandise trade deficit narrowed in November to its smallest level since December 2020 due to a plunge in imports.

The shortfall decreased 15.6 per cent – the most since 2009 – to US$83.3 billion last month, data from the Commerce Department showed on Tuesday (Dec 27). The figures, which were not adjusted for inflation, were comparable to a median estimate of a US$96.3 billion gap in a Bloomberg survey of economists.

Imports retreated 7.6 per cent to US$252.2 billion, the lowest in more than a year. The value of exports declined 3.1 per cent to US$168.9 billion.

The decline in imports was broad-based, led by a 13 per cent drop in the value of consumer goods. Other inbound shipments of vehicles, food and beverages and industrial supplies also decreased, as did most export categories.

While imports of consumer merchandise have fallen from a record level earlier this year, they remain higher than the pre-pandemic average. Americans have largely been spending on services instead of goods in recent months.

Another contributing factor is that economic activity in China – the US’ biggest partner for merchandise trade – slumped in November as Covid outbreaks spread across the country and people protested virus restrictions. As infections sweep across the nation, Shanghai – the world’s biggest container port – is isolating the shipment of international goods to prevent disruptions to global exports.

On Jan 5, more November trade figures will be released, including the balance on the services account as well as breakdowns by country.

Retail inventories

Retail inventories ticked up 0.1 per cent in November to US$738.7 billion from a month earlier. They had been declining as companies worked through stockpiles by offering steep discounts in the lead-up to the holiday shopping season. 

The Federal Reserve’s most aggressive monetary tightening since the 1980s has sent the US dollar surging, with the greenback strengthening against all Group of 10 and major Asian currencies this year. While that lowers the cost of imports, it also weakens demand in international markets for US-produced goods.

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Along with logistical improvements, that has helped ease the strain on US ports, especially at the key West Coast hubs that receive goods from Asia.

Inventories at wholesalers climbed 1 per cent to a fresh record of US$933.6 billion. BLOOMBERG