Trade Deficit Narrows, Countering a Report of a Contraction

The country’s trade deficit narrowed to $38.5 billion in December, its lowest reading in nearly three years, Commerce Department data showed. The decrease was driven by a drop in oil imports and a surge in exports. The overall trade gap was far smaller than analysts polled by Reuters had expected.

“Trade data for December paint a reassuring and encouraging picture of the U.S. economy at the end of last year,” said Chris Williamson, chief economist at Markit.

A separate report from the Commerce Department showed that wholesale inventories unexpectedly declined in December, a factor that could hamper the stronger trade figures’ effect on growth.

Still, the two reports together suggested the government could revise up its reading on fourth-quarter G.D.P., which showed the economy contracting at a 0.1 percent annual rate. That decline was driven by an expected drop in exports, smaller gains in inventories and a plunge in military spending.

Barclays said that even with December’s decline in wholesale inventories, the economy most likely expanded 0.3 percent in the fourth quarter, thanks to the higher export numbers in Friday’s trade report.

American exports increased by $8.6 billion in December over the year-ago month, lifted by sales of industrial supplies, including a $1.2 billion rise from November in nonmonetary gold.

Reflecting the country’s current boom in oil and natural gas, petroleum exports rose by nearly $1 billion during the month to a record high.

A fall in petroleum purchases led overall imports to decline by $4.6 billion in December from the year-ago period.

For the entire year, the country’s imports of crude oil fell to their lowest levels since 1997 in terms of volume.

Stocks prices on American exchanges rose as investors took note of the strong trade data, which included the United States figures as well as readings showing stronger exports and imports in China during January. The price of the benchmark 10-year Treasury note also rose.

For all of 2012, the United States trade gap shrank by 3.5 percent, to $540.4 billion. Running trade deficits means the country loses dollars, which drags on the economy; rising exports reduce that effect.

Exports last year rose 4.4 percent.

Even the American trade balance with China had a silver lining. While imports from China increased to a record high last year, so did American exports there. The December trade deficit in goods with China, not seasonally adjusted, narrowed by $4.5 billion from the previous month on a drop in imports.

Also in December, United States wholesale inventories unexpectedly fell as auto dealers and agricultural suppliers drew down their stocks.

The Commerce Department said stocks of unsold goods at wholesalers dropped 0.1 percent during the month and grew less than initially estimated in November.

Economists polled by Reuters had expected wholesale inventories to rise 0.4 percent.

Article source: http://www.nytimes.com/2013/02/09/business/us-trade-deficit-shrinks.html?partner=rss&emc=rss