Jump in U.S. trade deficit ‘not good news’ for economy
WASHINGTON — The trade deficit in December jumped to the highest level in more than two years as exports fell and Americans bought a record amount of imports — a potentially worrisome development that could weigh on overall economic growth.
The deficit jumped 17.1 percent to $46.6 billion in December, resulting in the biggest imbalance since November 2012, the Commerce Department reported Thursday. The widening trade gap reflected a drop in exports, which retreated 0.8 percent to $194.9 billion. Meanwhile, imports soared 2.2 percent to $241.4 billion.
Economists were split on the implications of the bigger-than-expected December trade deficit. The government estimated last week that the overall economy grew at a moderate 2.6 percent rate in the final three months of 2014 after turning in a sizzling 5 percent growth rate in the July-September period.
Paul Ashworth, chief U.S. economist at Capital Markets, said he believed much of the December trade data was reflected in the first GDP report released last week.
But Jennifer Lee, senior economist at BMO Capital Markets, said she thought the trade gap numbers, along with weaker growth in business stockpiles, could trim as much as 0.5 percentage point from the government’s estimate. Michael Feroli, an economist at JPMorgan, also took a dim view of the results. He is trimming his estimate of fourth-quarter growth to 2 percent, although he still expects a rebound to 3 percent growth in the January-March quarter.
“This is not good news for the final measure of economic growth,” Lee said in a research note.
The deficit for 2014 overall increased to $505 billion, up 6 percent from the 2013 deficit of $476.4 billion, the Commerce Department said. Economists expect the deficit to widen further in 2015 as strong growth in the United States boosts imports, while weak growth overseas and a rising dollar continue to depress exports.
The widening trade deficit was reported as the Obama administration is hoping to finally get Congress to approve the fast-track authority it needs to wrap up a major 12-nation trade agreement with Japan and other Pacific Rim countries known as the Trans-Pacific Partnership.
The administration sees the trade deal as one of the areas where he may be able to find common ground with Republicans, who for the first time in Obama’s presidency control both houses of Congress.
Commerce Secretary Penny Pritzker said exports had set a record for a fifth consecutive year — a fact that the administration plans to use to secure votes for the trade deal.
“These trade agreements will support the growth of jobs and the growth of middle-class economics,” she said.
But critics hoping to block the administration’s trade efforts in Congress pointed to the record level of imports and rising deficits with economic powers such as China and South Korea as proof that the U.S. push for liberalized trade is costing the country jobs.
“This abysmal data shows how the past agreements that serve as the template for the trade deals President Obama is now pushing destroy more middle-class jobs and further suppress wages,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.