U.S. goods trade deficit hits record high; retail inventories surge

• The U.S. trade deficit in goods widened to a record high in December as imports increased for a fifth straight month amid strong domestic demand, suggesting that trade likely remained a drag on economic growth in the fourth quarter. 
• But imports are helping to replenish depleted inventories, with the report from the Commerce Department on Wednesday showing strong restocking at retailers and wholesalers last month. Solid inventory accumulation likely offset the impact on gross domestic product from the larger trade gap, prompting some economists to raise their growth estimates for the last quarter. 
• "Strong demand and shifting consumer preferences during the pandemic led to a surge in imports that continues to outstrip exports and is contributing to all-time highs in the deficit," said Rubeela Farooqi, chief U.S. economist at High-Frequency Economics in White Plains, New York. 
• The goods trade deficit rose 3.0% to an all-time high of $101.0 billion last month. It was also the first time that the deficit breached the $100 billion threshold. The rebuilding for inventories could keep the goods trade deficit wide at least through the first half of this year. 
• Goods imports increased 2.0% to $258.3 billion, likely as the backlog at ports continued to be cleared. The increase in imports was driven by capital goods, motor vehicles, and consumer goods. But imports of food and industrial supplies declined. Goods exports rose 1.4% to $157.3 billion. There were increases in exports of consumer goods, industrial supplies, and motor vehicles. Capital goods exports also rose, but food exports tumbled.

 

(Source: Reuters)