WASHINGTON: The US trade deficit shrank sharply in December, official data showed yesterday, raising speculation that fourth-quarter economic growth was better than estimated.
The Commerce Department reported the trade gap narrowed 21 percent to $38.5bn, its lowest level since January 2010, from a revised $48.6bn in November.
The $10bn plunge — the biggest month-on-month decline in nearly four years — was largely due to a drop in oil imports, helped by falling oil prices. Imports fell 2.7 percent to $224.9bn. Petroleum imports plunged 13 percent to $22.1bn.
In December, exports rose 2.1 percent to $186.4bn, boosted by a 9.5 percent jump in industrial goods exports. US oil exports contributed significantly to the rise in exports, surging 8.7 percent from November as the country gears up domestic oil production.
The US is forecast to overtake Saudi Arabia as the world’s largest oil supplier by 2020.
“Imports ex-petroleum are still up 2.4 percent year-over-year, suggesting a big part of the weakness in imports is due to the substitution of domestic petroleum production for foreign oil production,” said Mei Li of FTN Financial.
The December trade gap reading snapped three months of widening deficits and came in well below the average analyst estimate of $45.4bn.
“The administration’s efforts to promote US exports are paying off, with export levels reaching a record $2.2 trillion in 2012,” Deputy Commerce Secretary Rebecca Blank said.
President Barack Obama has targeted doubling exports by 2015 to promote jobs and economic growth amid a tepid recovery from the Great Recession. Exports as a share of economic output in 2012 were 13.9 percent in 2012, tying the 2011 record.
Analysts were divided over whether the December data indicated that US economic growth in the fourth quarter might prove better than the first official estimate of an 0.1 percent contraction.
“It now looks likely that net trade provided a modest boost to Q4 GDP growth, having initially been estimated to have been a drag,” Barclays analyst Peter Newland said.
IHS Global Insight economist analyst Gregory Daco said that although underlying details of the report were mixed, overall the reading “will most likely erase the fourth quarter decline in real GDP.”
Daco predicted fourth-quarter GDP would be revised up to about 0.5 percent. But Robert Brusca, chief economist of FAO Economics, warned in a research note: “The real take away here is not that GDP will/might be revised up.”
“The trade figures are endorsing the fact that GDP is very, very, weak,” he said, noting the weakness in imports, which are tightly bound to economic output.
The closely watched trade gap with China, the country’s second-largest trade partner, shrank 15.5 percent in December to $24.4bn as imports of Chinese goods fell.
But for all of 2012 the China trade gap topped $300bn for the first time, soaring to a record $315.1bn. The US trade deficit also narrowed significantly with the European Union in December, falling 28.4 percent to $8.7bn.
“Renewed optimism in Europe is causing the euro to appreciate against the US dollar, thus benefiting the US and harming the eurozone,” said Michael Wolf of Moody’s Analytics. Compared with December 2011, exports were up 4.9 percent and imports fell 2.0 percent.
For the full year, the US trade deficit fell 3.5 percent to $540.4bn, with exports up 4.4 percent and imports rising 2.7 percent. AFP