Trade Deficit Narrows as Oil Falls, Wholesale Inventories Rise as Sales Increase Most in 5 Months

- The Trade Deficit for November shrank to -$58.2 billion versus estimates of -$60.0 billion and -$58.8 billion in October.
- Wholesale Inventories rose 1.3% versus estimates of a .5% increase and a downwardly revised .4% gain in October.

BOTTOM LINE: The US trade deficit unexpectedly shrank in November to the smallest since July 2005 as exports reached a record and oil imports declined, Bloomberg reported. US imports of consumer goods rose to $39.1 billion from $38.2 billion on increased demand for toys, televisions and clothing. Oil imports fell to $21.5 billion, the lowest since July 2005. The average price of a barrel of crude in December was $62.09. Oil is trading at $54/bbl. this morning. I expect the trade deficit to improve only modestly over the intermediate-term as an accelerating in US economic growth back to around average levels mostly offsets the benefits from a continuing decline in commodity prices.

Inventories at US wholesalers piled up in November at the fastest pace in three months as companies restocked shelves in anticipation of faster growth, Bloomberg reported. Wholesale Sales rose 1.0%, the most in five months. The better-than-expected trade deficit and inventory rebuilding led economists at Morgan Stanley to increase their US 4Q GDP growth estimate to 2.9% from 2.5%. Sales of durable goods at wholesalers, which includes computers and imported autos, rose .5%, the largest increase since May 2006. Wholesale petroleum inventories rose 3.1% in November. I expect inventory rebuilding to remain muted until later this year as homebuilding and auto production cutbacks subside further.