US Trade Deficit Narrowed in November

The U.S. trade deficit narrowed in November likely as efforts by businesses to reduce an inventory overhang pushed imports of goods to their lowest level in nearly five years, outpacing a drop in exports.

The Commerce Department said on Wednesday the trade gapfell 5.0 percent to $42.4 billion. October’s trade deficit was revised up to $44.6 billion from the previously reported $43.9 billion.

Despite the shrinking trade deficit, declining exports are the latest indication that economic growth braked sharply in the fourth quarter. While inventories likely accounted for much of the drop in imports, the weakness could also be pointing to a slowdown in domestic demand, which was flagged by weak December automobile sales.

Economists polled by Reuters had forecast the trade gap widening to $44.0 billion in November. When adjusted for inflation, the deficit fell to $59.60 billion from $61.03 billion in October.

Trade, which subtracted 0.26 percentage point from gross domestic product in the third quarter, is likely to have remained a drag on growth in the fourth quarter.

A strong dollar and the inventory bloat, which has left businesses with little appetite to order more merchandise, have combined with spending cuts in the energy sector to take some steam out of the economy in recent months.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza