US trade balance is deteriorating, despite record exports - BBH

Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman & Co. (BBH) offers his view on the latest US trade balance data released this Tuesday.

Key quotes:

“The US trade deficit swelled in December, and the $53.1 bln shortfall was a bit larger than expected.  It was the largest deficit since October 2008.  For the 2017, the US recorded a trade deficit of goods and services of $566 bln, the largest since 2008.” 

“The deterioration of the trade balance may be worse than it appears.  There has been significant improvement in the oil trade balance.  In 2017, the real petroleum balance was just shy of $96 bln, the smallest in 14 years.  The non-oil goods deficit of almost $740.7 bln was a new record.” 

“Exports rose 1.8% in December to $203.35 bln.  This is a record.  There was a record shipment of capital goods, and increases in industrial supplies and materials.  Exports rose 7.3% in 2017.  Imports rose 2.5% in December to a record $256.5 bln.  Imports rose 9.5% in 2017.  There were record purchases of foreign produced consumer goods and capital goods.” 

“Net exports were estimated to have subtracted 1.1 percentage points from Q4 GDP, and the risk is that it was a slightly larger drag.  When adjusted for inflation, the real goods deficit widened to $68.4 bln from $66.5 bln in November.”