US trade gap narrows with imports down to near 5-year low

WASHINGTON • America's trade deficit shrank in November as a decline in imports exceeded a drop in the value of shipments abroad.

The gap narrowed 5 per cent to US$42.4 billion (S$60.9 billion) from a revised US$44.6 billion in October that was wider than previously estimated, the Commerce Department reported yesterday.

Imported merchandise, primarily consumer goods, decreased to the lowest level since February 2011 and is partly explained by the limited progress companies made getting inventories more in line with demand.

At the same time, persistent dollar strength and weakness in global markets continued to reduce overseas sales, indicating trade will do little to spur the US economy.

Companies "are trying to get their inventories into better balance with what they perceive final demand to be", said economist Brian Jones of Societe Generale.

He added: "On the import side, what's crucial is to see how domestic demand performs. We know that there's overseas weakness."

After eliminating the effects of price fluctuations, which generates the numbers used to calculate gross domestic product, the trade deficit narrowed to US$59.6 billion in November from US$61 billion the previous month. Imports of goods and services decreased 1.7 per cent to US$224.6 billion, marking the third consecutive month of declines.

Falling commodity prices also weighed on the value of imported industrial supplies, including steel and petroleum . The US imported an unadjusted US$10.7 billion worth of petroleum-related products.

Oil prices slid more than 4 per cent to a new 11-year low yesterday, as the row between Saudi Arabia and Iran made any cooperation between major exporters to cut output more unlikely.

Benchmark Brent crude futures were at US$35.07 a barrel at 1318 GMT (9.18pm Singapore time), down US$1.58 on the day, and reached their lowest since early July 2004, having staged their largest one-day drop in percentage terms in nearly five weeks.

Payroll processor ADP also released data yesterday saying private sector employment rose by 257,000 last month, the largest gain since December 2014, after increasing by 211,000 in November.

"The labour markets are finishing the year with a bang, that's for sure. December was extraordinarily warm as well, which means the number may exaggerate the labour market strength," said Mr Chris Rupkey, chief financial economist at MUFG Union Bank in New York.

Yesterday's data came hours before the US Fed Reserve Open Market Committee was to release minutes of their December meeting when interest rates were increased for the first time in nearly a decade.

Four rate hikes predicted for this year are close to his expectations, Federal Reserve vice-chairman Stanley Fischer said at an interview with CNBC yesterday, but he added that global uncertainty could still veer this path off course. "My view is that those numbers are in the ballpark," said the Fed's second-in- command.

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on January 07, 2016, with the headline 'US trade gap narrows with imports down to near 5-year low'. Print Edition | Subscribe