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US Trade Deficit Narrows Unexpectedly in November

Jan. 9, 2024
Resilient consumption has supported U.S. trade, but analysts have expected the effect of higher interest rates, as it weighs on demand, to add pressure on imports.

The U.S. trade gap narrowed in November with imports and exports both falling while higher interest rates bite, the government reported Tuesday.

Although analysts expected the trade deficit to widen slightly, the gap was smaller than anticipated at $63.2 billion, down from a revised October figure of $64.5 billion, the Commerce Department said.

Resilient consumption has supported U.S. trade, but analysts have expected the effect of higher interest rates, as it weighs on demand, to add pressure on imports.

Meanwhile, exports could take a hit from slower growth in major U.S. trading partners as well, on the back of monetary policy tightening.

In November, U.S. exports slipped $4.8 billion to $253.7 billion while imports dropped more, by $6.1 billion, to $316.9 billion.

"The November trade report signaled a sharp slowdown in exports and imports, with net trade likely to be broadly neutral for fourth quarter GDP growth," said U.S. Economist Matthew Martin of Oxford Economics.

While consumer spending is set to slow in the coming quarters, it should still be robust enough to "prevent prolonged declines in imports," Martin said in a note.

He added that exports have fared "relatively well" despite the weak global backdrop and should also be helped by a weakening dollar.

Behind November's decrease in exports was a fall in goods, including $3.6 billion less in industrial supplies and materials such as crude oil and nonmonetary gold.

Imports of goods also slipped, on the back of lower consumer goods imports such as those of cell phones and pharmaceutical preparations.

The U.S. goods deficit with China slid $2.4 billion to $21.5 billion in November, the smallest in a year, said the report.

So far, the trade gap has been on average wider in the fourth quarter compared with the third, said Chief U.S. Economist Rubeela Farooqi of High Frequency Economics.

"The outlook for trade flows going forward is likely one of moderation, given the trajectory for demand and growth should slow, both domestically and abroad," she added.

Copyright 2024, Agence France-Presse

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