U.S. trade deficit widens in December on rebound in imports

U.S. trade deficit broadened for the first time in three months in December. The trade deficit widened to USD 48.9 billion, as compared with market expectations of a deficit of USD 48.2 billion. Meanwhile, the data for November was upwardly revised to a deficit of USD 43.7 billion from USD 43.1 billion.

Goods exports rose 0.8 percent sequentially, as industrial supplies and materials recorded a big rebound from a soft November. Meanwhile, consumer and automotive goods recorded a sharp fall in December, declining 3.6 percent and 7.8 percent, respectively. In real terms, exports rose 1 percent in December.

After three months of contractions, goods imports rose sharply in December, rising 2.7 percent on the month. Barring automotive imports, all other product categories recorded rises in December, with the largest contribution coming from industrial supplies and goods which surged almost 10 percent. A significant reason for the rise was a considerable rebound in imports of energy-related petroleum. Excluding price effects, imports rose 2.6 percent in December.

Services exports and imports both recorded rises in the month. Services exports rose 0.4 percent, while imports rose 0.8 percent sequentially.

“The phase one trade deal should imply a better outlook for U.S. exports and imports in 2020, but we might have to wait some time longer before we see it in the data. With the novel coronavirus still posing a dangerous threat, Chinese production and demand will likely slump in the early parts of this year. Accordingly, it has been reported that China is hoping for flexibility on its commitments outlined in the phase one trade deal. Specifically, the pledge to increase it's imports of U.S. goods and services by $200 billion by 2021. It was unlikely that China was ever going to meet this target, but in the face of the virus outbreak, the probability moves even closer to zero”, said TD Economics in a research report.