Trade Deficit Widens, Exports Hit Another Record, Import Prices Decelerate

- The Trade Deficit for November widened to -$63.1 billion versus estimates of -$59.5 billion and -$57.8 billion in October.

- The Import Price Index for December was unch. versus estimates of a .1% gain and an upwardly revised 3.3% gain in November.

BOTTOM LINE: The US trade deficit widened more than forecast in November as Americans spent a record amount on imported oil, overwhelming another record-setting month for US exports, Bloomberg said. Sales of automobiles, corn, refined petroleum products and industrial engines contributed to another surge in US exports. Imports rose 3%, reflecting record purchases of crude oil as the average price shot up to $79.65 a barrel, the highest ever. The rise in petroleum imports accounted for about two-thirds of the increase in the trade gap. Purchases of capital equipment by US companies and consumer imports also contributed to the increase. The US economy shouldn’t fall into recession as consumer spending softens without falling too much and exports keep surging to records, a Bloomberg News survey of economists this month showed. I expect the Trade Deficit to continue to trend lower over the intermediate-term as energy prices fall.

Prices of goods imported into the US were unchanged in December, as oil costs receded from a record high, Bloomberg reported. The price of imported petroleum and petroleum products dropped .6% after jumping 12.7% the prior month. Natural gas prices rose 2.8% in December, but were 2.7% lower from year ago levels. Costs for industrial materials, such as metals, fell .1%. I still think Import Prices increases have peaked for this cycle and that overall inflation will continue to decelerate over the intermediate-term.