Sunday 17 December 2017

US imports point to soft Q4 growth but firmer spending

Jason Lange

THE U.S. trade deficit unexpectedly widened in November, a drag on economic growth, although the increase was driven by a surge in consumer goods imports, which gives a positive signal for consumer spending.

Other data on Friday showed declining prices for U.S. imports and exports, a sign of the chill in the global economy that is hurting exporters but giving respite to U.S. drivers stung by high fuel prices.

America's trade deficit widened 16pc in November to $48.7 billion, the Commerce Department said.

Analysts were expecting the deficit to shrink to $41.3bn, and the report led some economists to consider trimming their forecasts for economic growth in the fourth quarter.

"This is not good news for the fourth quarter GDP growth," said Peter Cardillo, an economist at Rockwell Global Capital in New York.

When a country imports more than it exports, cash is sucked out of its economy, subtracting from gross domestic product.

The trade deficit was the widest since April, and its expansion was driven by a 3.8pc increase in imports, the largest gain in eight months.

Imports of consumer goods rose by $4.6bn, while imports of petroleum products fell by $870m.

That might point to firmer consumer demand, which is the main engine of the U.S. economy. At the same time, the risk remains that the imported goods could languish on businesses' shelves if purchasing managers are misreading consumer demand.

"The good news is the strength in imports is a sign that the U.S. economy is buying imports," said Cary Leahey, an economist at Decision Economics in New York. "Whatever the fourth quarter GDP prints, it will understate the momentum."

U.S. stock index futures were little changed following the data.

While the Commerce Department does not release seasonally adjusted data for the U.S. trade deficits with countries and regions, the U.S. goods trade gap with China fell 1.7pc from October, with a drop in exports outweighing a slighter fall in imports.

Imports surged 4.1pc from the European Union, and were up 6.4pc from Germany.

Overall, seasonally adjusted exports rose 1pc.

The increase was held back by a 1.3pc decline in exports to the European Union, which continues to battle a sovereign debt crisis that has sent several of its member countries into recession.

Separately, the Labour Department said import prices fell 0.1pc in December, in line with the expectations of economists polled by Reuters.

Prices fell 0.1 percent for both fuel and non-fuel imports.

That points to a tame inflation environment, which should allow the Federal Reserve to stay on its ultra-easy monetary policy course as it tries to nurse the economy back to health.

Import prices fell 1.5pc in the 12 months through December, with prices for fuel down 6.4pc over that period and non-fuel prices up just 0.1pc.

Export prices also fell in December from November, dragged down by a 0.2pc drop in prices for non-agricultural exports. Prices fell for exported capital goods and consumers goods.

U.S. manufacturers selling their goods abroad appear to have declining power in pricing as the global economy takes a hit from Europe's debt crisis.

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