U.S. International Trade (December 2021)

U.S. trade deficit widens slightly in December, as activity picks up

• The U.S. trade deficit widened to $80.7 billion in December from $79.3 billion in November. Total exports (goods and services) increased by 1.5% (+0.3% in November), while imports rose 1.6% (+4.6% in November).
• Goods exports rose 1.3% in December (-1.7% in November). The gains were broad based. Automotive vehicles, parts and engines (+6.5%), consumer goods (excluding automotive, +6.0%), capital goods (+2.0%), and industrial supplies and materials (+0.8%) all advanced. Foods, feeds and beverages (-7.1%) and other merchandise (-2.0%) pulled back. Accounting for price changes, real goods exports rose by 3.2%.
• Goods imports increased by 2.0% (compared to a 5.1% increase in November). The results were mixed across product categories. The gain was powered by automotive vehicles parts and engines (+8.4%), consumer goods (excluding automotive, +7.8%), and capital goods (+3.6%). Excluding price changes, real imports rose 2.3% in December. 
• Exports of services expanded by 2.0% on the month (+5.3 % in November), while imports of services fell by 0.7% (+2.5% in November).       

Key Implications

• Well, another month of data showing America's monster appetite for goods powering the trade deficit. Widening from November, the deficit is now the second deepest on record, just short of September's record $81.4 billion. 
• That said, there appears to be some relief on the horizon. We have been anticipating a rotation from goods to services expenditures as the economy reopens and households become more resilient to waves of the pandemic. Indeed, December's personal consumption expenditures showed real goods consumption had fallen 6.5% since peaking in March 2021 – now at its lowest level since February 2021. Signs point to the rebalancing of the consumption basket being well under way and as price gains for goods moderate, so too will the trade deficit.  

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