U.S. nominal goods deficit widens modestly in November, net exports’ contribution to GDP likely lower

U.S. advance estimate of trade in goods indicates that the nominal goods deficit widened modestly in the month of November. The goods deficit widened to USD 69.7 billion from USD 68.1 billion in October. The deficit was modestly wider than consensus expectations of USD 68.1 billion, driven by a stronger-than-expected rise in imports.

Delving into details, the total exports grew 3 percent sequentially, after a modest decline in October. Exports continue to reflect strong growth outside the U.S. Meanwhile, nominal imports rose 2.7 percent sequentially, the third straight month of positive growth. Imports of capital goods and consumer goods rose strongly, with the former rising 2.6 percent and the latter growing 4.2 percent.

Capital goods imports rose 13.4 percent year-on-year and reflect a more buoyant business spending environment, which in turn is responding to the stability of the industrial side of the economy last year and the strong global growth environment, among other factors. In the meantime, strength in consumer goods imports shows the stable rate of growth in personal income and spending. Hence, in spite of the trade deficit widening more than expected, the strength in capital and consumer goods imports are seen as reflective of a healthy underlying rate of economic activity, stated Barclays in a research report.

The higher-than-anticipated trade deficit suggests a lower contribution from the net exports subcomponent to total GDP. Moreover, the core goods deficit was broader than expected and implies lower equipment investment in the fourth quarter. But the inventories side of the report was stronger than we had expected and suggests a higher contribution from the inventories subcomponent to overall economic growth, added Barclays.

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