U.S. goods trade deficit hits record high; retail inventories surge

Stacks of merchandise are photographed during operations on Cyber ​​Monday at the Amazon Fulfillment Center in Robbinsville, New Jersey, US, November 29, 2021. REUTERS/Mike Segar/File Photo

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  • The goods trade deficit increased 3.0% in December
  • Retail stocks rose 4.4%; Wholesale sales rise 2.1%
  • New home sales jump 11.9% in December

WASHINGTON (Reuters) – The U.S. trade deficit in goods widened to a record in December as imports increased for a fifth consecutive month amid strong domestic demand, suggesting that trade is likely to remain a drag on economic growth in the fourth quarter.

But imports are helping replenish depleted stocks, with a report released by the Commerce Department on Wednesday showing strong restocking at retailers and wholesalers last month. The strong inventory buildup is likely to offset the impact on GDP from the larger trade gap, which has led some economists to raise their growth estimates for the fourth quarter.

said Rubella Farooqi, chief US economist at High Frequency Economics in White Plains, New York.

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The goods trade deficit rose 3.0% to an all-time high of $101.0 billion last month. It is also the first time that the deficit has crossed the $100 billion threshold. Rebuilding stocks could keep the goods trade deficit wide at least through the first half of this year.

Goods imports increased 2.0% to $258.3 billion, likely as backlogs at ports continued to be cleared. The increase in imports was driven by capital goods, automobiles, and consumer goods. But imports of food and industrial supplies fell.

Goods exports rose 1.4 percent to $157.3 billion. There were increases in exports of consumer goods, industrial supplies, and automobiles. Capital goods exports also rose, but food exports declined.

The report was released ahead of fourth-quarter GDP data on Thursday. Subtract trade from GDP growth for five consecutive quarters. According to a Reuters survey of economists, the economy likely grew at an annual rate of 5.5% in the most recent quarter, an acceleration from the third quarter’s pace of 2.3%.

Inventory investment is likely responsible for much of the expected acceleration in GDP growth in the last quarter. Growth last year is expected to be the strongest since 1984.

The Commerce Department report showed retail inventories rose 4.4% in December after rising 2.0% in November. Inventories of autos and parts jumped 6.8% after rising 4.3% in November. They were hampered by the global shortage of semiconductors, which reduced the production of cars.

Retail inventories excluding autos accelerated 3.6% after rising 1.2% in November. This component enters into the calculation of GDP growth.

trade balance

Increase growth estimates

JPMorgan economists raised their fourth-quarter GDP growth estimate to 7.5% from the 7.0% pace. IHS Markit raised its forecast 1.3 percentage points to 7.4%.

The data published on Wednesday is unadjusted for inflation, indicating little uncertainty over the estimate of inventory investment in Thursday’s snapshot of fourth-quarter GDP.

“But the existing data suggests that the real inventory buildup in the fourth quarter was significant,” said Daniel Silver, an economist at JPMorgan in New York. “While inventories should be very supportive of GDP growth in the fourth quarter, we believe this buildup presents a downside risk to our forecast for first-quarter real GDP at 1.5%.”

Inventories at wholesalers rose 2.1% last month after rising 1.7% in November. There were increases in inventories of both durable and non-durable goods.

Inventory buildup has been constrained by global shortages linked to COVID-19, and strong increases over the past two months provide hope that the worst of the supply chain disruptions are overdue.

“Supply chain issues are likely to take some time, which could keep US commodity inflation elevated,” said Ryan Sweet, chief economist at Moody’s Analytics in West Chester, Pennsylvania.

There was also some encouraging news in the housing market, where another report from the Commerce Department showed new home sales rose 11.9% to a seasonally adjusted annual rate of 811,000 units in December, the highest level since March.

New home sales

However, the outlook for the housing market is uncertain amid expensive building materials, labor shortages and rising mortgage rates.

“Demand should remain strong, but supply is only expected to increase gradually and the rise in prices before December combined with the recent rise in mortgage rates will marginalize many,” said Nancy Vanden Houten, US economist at Oxford Economics in London. of potential buyers. New York.

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(Reporting by Lucia Moticani) Editing by Andrea Ricci

Our Standards: Thomson Reuters Trust Principles.

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