WASHINGTON – The U.S. trade deficit expanded in November to its widest point in seven months, driven by a surge in imports that outpaced only modest growth in exports.
The Commerce Department report Friday suggests trade will drag on economic growth in the October-December quarter. A wider trade gap slows growth because it means Americans spent more on foreign products while U.S. businesses earned less in overseas sales.
Still, the report showed consumers have maintained an appetite for spending. They kept buying iPhones and other imported goods in November, despite high unemployment and low wage growth.
“A strong rebound in imports is not necessarily all bad for the U.S. economy because it indicates that consumers are spending. It shows the private sector is not dead,” said Gregory Daco, senior economist at HIS Global Insight.
The trade gap widened 15.8 per cent to $48.7 billion in November from October, the report noted. Imports grew 3.8 per cent, led by gains in shipments of cellphones, including Apple’s new iPhone.
Exports increased only 1 per cent. And exports to Europe fell 1.3 per cent, further evidence of the prolonged debt crisis that has gripped the region.
Paul Ashworth, chief U.S. economist at Capital Economics, predicts trade trimmed growth by about 0.5 percentage point in the final three months of the year. He expects fourth-quarter growth to be no more than an annual rate of 1.5 per cent. That would be nearly half the 3.1 per cent rate reported for the July-September quarter, which was helped by healthy growth in exports.
Martin Schwerdtfeger, senior economist at TD Bank, also expects the trade deficit to subtract from October-December growth. But he said the flood of imports could be signalling stronger consumer spending and business investment.
“The higher imports could mean that domestic consumption is improving. That would override some of the drag from a higher trade deficit,” Schwerdtfeger said.
Through the first 11 months of 2012, the trade deficit is running at an annual rate of $546.6 billion. That’s roughly 2.4 per cent lower than the 2011 deficit.
Imports of consumer goods grew to a monthly record in November. Much of the growth was from cellphones and other household electronics products.
Oil imports dropped 2.5 per cent, reflecting a fall in prices and lower volume.
Imports of foreign-made autos and auto parts rose, likely reflecting catch-up shipments following port disruptions in October caused by Superstorm Sandy.
The U.S. trade deficit with China, the largest with any country, totalled $29 billion in November. That’s down slightly from the monthly record of $29.5 billion in October. But the trade gap with China is still on track to set a new annual record in 2012.
Trade was a modest positive for overall economic growth in 2012 and many economists believe that trend will continue in 2013. However, that forecast is based on a view that the European debt crisis stabilizes and growth in Asia begins to rebound.
In its latest outlook, a forecasting panel for the National Association for Business Economics predicted that the U.S. trade deficit for 2013 will total $533 billion, a slight improvement from the $540 billion deficit they expect when the trade numbers are totalled up for all of 2012. That expectation for a slight improvement is based on a view that export growth will outpace imports in 2013.