Whiplash: Trade Balance Widens by $13 Billion

Summary The U.S. trade balance widened by $13.0 billion in November, practically reversing the sharp narrowing in the deficit a month earlier. Strong imports continue to reflect the more robust recovery in the United States, but are also a sign of incremental improvement in easing supply chain constraints. Imports of semiconductors rose by the most in eight months. The trade data have been particularly volatile in recent months, and November’s data suggest net exports will now be a drag on growth for the sixth consecutive quarter in Q4. Another Quarter, Another Drag The trade balance widened by $13.0 billion in November, nearly reversing the $14.3 billion narrowing in the balance a month earlier. Somewhat encouragingly, exports were modestly positive during the month, rising 0.2%, but that was due entirely to services trade. The sharp widening in the deficit thus came from a 4.6% surge in imports in November. Despite positive export growth, the November data confirm our impression that the surge in October exports was due to one-off factors and monthly volatility rather than the start of a sustained narrowing in the deficit. Imports clearly remain robust and will likely continue to exert downward pressure on the trade balance for some time. The particularly volatile trade estimates in recent months (chart) have caused whiplash, and the November data will likely lead us to reverse the boost we had penciled in for Q4 net exports—net exports look to once again be a drag on fourth quarter growth. READ FULL ARTICLE>>