- The U.S. trade deficit narrowed for the third consecutive month, declining to $43.1bn in November from a slightly revised $46.9bn in October (previously $47.2bn). The improvement was a bit better than the consensus forecast.
- Goods exports rose 0.7%, ending two consecutive months of declines. The end of the GM strike helped stoke a rebound in automotive exports (and imports). In fact, all goods exports posted an advance in November except for industrial supplies. After removing the impact of price changes the story remains largely unchanged, with goods export volumes rising 0.5.
- In contrast, goods imports declined for the third consecutive month, dropping by 1.4% – less than September and October’s greater than 2% drops. Modest declines were observed in all categories except automotive goods, which rebounded modestly due to the end of the GM strike in the previous month. On a price-adjusted volumes basis, goods imports fell 1.3% (October: -2%).
- Services exports rose 0.6% in November, while services imports rose 0.8%.
Key Implications
- Once again the improvement in the trade balance in November failed to signal trade strength for the fourth quarter. Although exports registered an improvement, the third consecutive monthly decline in goods imports may be signaling weaker domestic demand for goods at the end of 2019 resulting from lower spending and/or less of a desire for firms to build inventory. Moreover, the weakness in consumer goods could also reflect ongoing distortions from September’s tariff hike on imported goods from China.
- With a phase 1 trade deal between the U.S. and China expected to be signed as soon as next week, the threat of an escalation in tariffs has receded. If China were to follow through with its intentions to purchase a broad swathe of goods and services this deal should result in a material boost to U.S. goods exports. However, one cannot discount the impact that potential tariffs on other goods from the EU and Latin America could have on further distorting trade data in the months ahead, not to mention the likely boost to trade policy uncertainty that could rattle financial markets.
