U.S. trade deficit narrows further in November

The U.S. trade deficit narrowed for the third straight month in November. The deficit eased to USD 43.1 billion in November from a slightly revised deficit of USD 46.9 billion seen in the prior month. The rebound was slightly better than the consensus expectations.

Exports of goods rose 0.7 percent, ending two straight months of fall. The end of the GM strike aided in the recovery in automotive exports and imports. In fact, all goods exports recorded a rise in November except for industrial supplies. After removing the effect of price changes, the story continues to be greatly unchanged, with goods export volumes rising 0.5.

On the contrary, goods imports dropped for the third straight month, falling 1.4 percent – less that September and October’s greater than 2 percent falls. Modest falls were seen in all categories except automotive goods, which recovered modestly, owing to the end of the GM strike in the prior month. On a price-adjusted volumes basis, goods imports dropped 1.3 percent. Services exports grew 0.6 percent in November, while services imports grew 0.8 percent.

The rebound in the trade balance in November failed to hint at trade strength for the fourth quarter, noted TD Economics in a research report. Although exports saw a rebound, the third straight month fall in goods imports might be hinting at softer domestic demand for goods at the end of 2019 resulting from lower spending and/or less of a desire for companies to build inventory. Furthermore, the softness in consumer goods might 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”, added TD Economics.