- The U.S. trade deficit in goods mushroomed to the widest ever in November as imports of consumer goods shot to a record ahead of the second straight COVID-distorted holiday shopping season along with industrial supplies, while exports slipped after a historic gain a month earlier.
- Omicron also stands as a downside risk in the housing market.
- Economists at Action Economics have dialled back their fourth-quarter GDP growth estimate to 6.5% from 7.0%, with exports now seen subtracting from growth rather than adding to it as had been previously expected.
- Pending home sales were lower in all four regions.
The U.S. trade deficit in goods mushroomed to the widest ever in November as imports of consumer goods shot to a record ahead of the second straight COVID-distorted holiday shopping season along with industrial supplies, while exports slipped after a historic gain a month earlier as reported by Reuters
Goods trade gap
The goods trade gap reported Wednesday by the Commerce Department is likely to remain historically high as long as the coronavirus pandemic continues, economists said.
The emergence of the fast-spreading Omicron variant of COVID-19 that has driven U.S. and global caseloads to a record this week may exacerbate it further in the near term if it limits American consumers’ spending on services and restokes demand for imported goods.
Omicron also stands as a downside risk in the housing market.
The goods trade deficit widened last month by 17.5% to $97.8 billion from $83.2 billion in October, Census Bureau data showed.
That exceeds the previous record deficit set in September of $97 billion and may dampen optimism that trade might finally add to U.S. economic growth this quarter for the first time in more than a year.
Further demand
Imports rose by 4.7% with industrial supplies leading the way with an increase of $5.7 billion to $63.2 billion, followed by consumer goods rising by $2.9 billion to just shy of $67 billion as retailers rushed to fill store shelves ahead of Christmas.
“The emergence of the Omicron variant may further ignite demand for imported goods if services activity is restricted” in the first quarter of 2022, Nancy Vanden Houten, lead economist at Oxford Economics, wrote after Wednesday’s report.
Goods exports, meanwhile, declined 2.1%, with weakness across the board outside of a 4.3% increase in food exports.
The drop was led by declines of $1.4 billion in industrial supplies and $1.3 billion in capital goods.
The worldwide surge of coronavirus cases to a record in recent days – including a record U.S. caseload – may weigh on global demand in the months ahead, risking an even wider trade gap, Vanden Houten said.
Advanced indicators
The so-called Advanced Indicators report also showed wholesale inventories climbed 1.2% last month, while retail inventories increased 2.0%.
Trade has been a drag on gross domestic product growth for five straight quarters, while inventories added to output in the third quarter.
The big reversal to a record goods trade gap in November may prompt a rethinking of that.
Economists at Action Economics have dialled back their fourth-quarter GDP growth estimate to 6.5% from 7.0%, with exports now seen subtracting from growth rather than adding to it as had been previously expected.
Economists at JPMorgan and Goldman Sachs, meanwhile, left their estimates intact at 7%.
New cases
Meanwhile, contracts to buy the U.S. previously owned homes fell unexpectedly in November as limited housing stock and lofty prices crimped activity, and the explosion of new coronavirus cases poses a risk to the housing market headed into 2022.
NAR said its Pending Home Sales Index, based on signed contracts, fell 2.2% last month to 122.4.
Pending home sales were lower in all four regions.
“There was less pending home sales action this time around, which I would ascribe to low housing supply, but also to buyers being hesitant about home prices,” said Lawrence Yun, NAR’s chief economist.
Looking ahead, Yun said Omicron poses a risk to the housing market’s performance, as buyers and sellers are sidelined, and home construction is delayed.
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Source: Reuters
