WASHINGTON: The US goods trade deficit widened sharply in December as slowing global demand and a strong dollar weighed on exports, another sign that economic growth slowed in the fourth quarter. Other data from the Commerce Department on Wednesday showed new orders for US-made goods barely rose in December and business spending on equipment was much weaker than previously thought, pointing to a softening in manufacturing activity.
The reports, which added to weak December data on retail sales and housing starts, could prompt economists to cut fourth-quarter GDP estimates. But some of the drag on growth from the goods trade gap and weak business spending on equipment could be offset by a strong increase in inventories in December.
The goods trade deficit jumped 12.8 per cent to $79.5 billion in December, boosted also by an increase in imports. Exports fell 2.8 per cent amid steep declines in shipments of foods, industrial supplies and capital goods. Imports increased 2.4 per cent driven by food and capital and consumer goods.
Retail inventories increased 0.9 per cent in December after falling 0.4 per cent in the prior month. Retail inventories, excluding motor vehicles and parts, the component that goes into the calculation of gross domestic product, rebounded 1.0 per cent in December after dropping 0.9 per cent in November.
Growth estimates for the fourth quarter are currently around a 2.0 per cent annualised rate. The government will publish the fourth-quarter GDP report on Thursday. The economy grew at a 3.4 per cent pace in the third quarter.
US stocks added to losses after US Trade Representative Robert Lighthizer said US issues with China are “too serious” to be resolved by promises of more purchases of US goods by Beijing. Prices of US Treasuries modestly pared losses, while the dollar added to gains against the yen and euro. In another report on Wednesday, the Commerce Department said factory goods orders edged up 0.1 per cent in December amid declining demand for machinery and electrical equipment, appliances and components.
Data for November was revised slightly up to show factory orders falling 0.5 per cent instead of the previously reported 0.6 per cent drop. Economists polled by Reuters had forecast factory orders rising 0.5 per cent in December.
Manufacturing, which accounts for about 12 per cent of the economy, is slowing as some of the boost to capital spending from last year’s $1.5 trillion tax cut package fades. In addition, the strong dollar and cooling growth in Europe and China are hurting exports. Lower oil prices are also slowing purchases of equipment for oil and gas well drilling. — Reuters
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