The U.S. Trade Deficit Hits a 9-Year High: February 5 – 9

Imports grew faster than had exports during the final days of 2017. Here are the five things we learned from U.S. economic data released during the week ending February 9.

#1The trade deficit widened again in December. The Census Bureau and Bureau of Economic Analysis report that exports grew by $3.5 billion during the month to $203.4 billion (+7.3 percent versus December 2016) while imports blossomed by $6.2 billion to $256.5 billion (+9.5 percent versus December 2016). This left the U.S. trade deficit at a seasonally adjusted -$53.1 billion, $2.7 billion larger than that of November, up 19.1 percent over the past year, and the biggest single-month trade deficit since October 2008. The goods deficit widened by $2.6 billion during December to -$73.3 billion while the services surplus narrowed by $0.1 billion to +20.2 billion. The former reflected a $6.0 billion increase in imported goods (led by pharmaceutical preparations, cell phones, automobiles, and capital goods) and a $3.4 billion gain in exported goods (led by industrial suppliers/materials and capital goods). The United States had its largest goods deficits with China (-$34.0 billion), the European Union (-$17.2 billion), and Mexico (-$6.1 billion). The trade deficit was -$566.0 billion for all of 2017, 2.9 percent of the Gross Domestic Product (GDP). This was up from -$504.8 billion (or 2.7 percent of GDP) in 2016 and represented the largest annual trade deficit since 2008.Trade Deficit 2007-2017 020918

#2Hiring held firm as 2017 ended, while the count of job openings slipped. The Bureau of Labor Statistics estimates that there were a seasonally adjusted 5.811 million job openings at the end of December. This was 167,000 under the count from a month earlier but 4.9 percent above that from December 2016. The private sector had 5.290 million open jobs at the end of December, a 4.4 percent increase from a year earlier. Industries seeing the biggest year-to-year percentage gains in job openings were leisure/hospitality (+21.9 percent), state/local government (+20.1 percent), construction (+12.9 percent), retail (+8.2 percent), and manufacturing (+6.4 percent). Employers hired a seasonally adjusted 5.488 million people during December, down by only 5,000 from November but 3.5 percent ahead of the count of hires in December 2016. Private sector employers added 5.129 million workers (+2.9 percent versus December 2016). Industries with the largest percentage hiring gains included manufacturing (+20.1 percent), state/local government (+18.9 percent), wholesale trade (+10.8 percent), and professional/business services (+4.5 percent). 5.238 million people left their jobs during December, up 26,000 for the month and 3.0 percent from a year earlier). Voluntary quits jumped by 98,000 during the month to 3.259 million people (+5.6 percent versus December 2016) while layoffs decelerated by 80,000 to 1.645 million (+1.3 percent versus December 2016).

#3The service sector strengthened in January. The “NMI” from the Institute for Supply Management added 2.9 points during the month to a seasonally adjusted reading of 59.9. This was the 96th consecutive month in which the NMI was above a reading of 50.0, indicative of an expanding nonmanufacturing side of the economy. Three of the four components to the index gained during January: new orders (up 8.2 points to 62.7), employment (up 5.3 points to 61.6), and business activity/production (up 2.0 points to 59.8). The measure for supplier deliveries was unchanged at 55.5. Fifteen of 18 tracked service sector industries expanded during the month, led by company management/support services, arts/entertainment/recreation, and mining. The press release noted that survey respondents shared positive feedback on the business conditions and that “recent tax changes have had a positive impact on their respective businesses.”

#4Consumers slightly slowed their pace of taking on debt in December. Consumers held a seasonally adjusted $3.841 trillion in outstanding non-real estate backed debt at the end of the month, an increase of $18.4 billion from November and 5.4 percent from a year earlier. The Federal Reserve indicates revolving credit balances (e.g., credit cards) grew by $5.1 billion to $1.028 trillion. This represented a 6.0 percent increase since December 2016. Nonrevolving credit balances, which include student and automobile loans, grew by $13.3 billion to $2.813 trillion. Outstanding nonrevolving credit balances have risen 5.1 percent over the past year. 

#5Banks loosened credit standards for their commercial clients, but demand for C&I loans was mostly unchanged. Sixteen percent of the banks responding to the Federal Reserve’s January 2018 Senior Loan Officer Opinion Survey on Bank Lending Practices reported loosening lending standards to their large and middle-market commercial and industrial (C&I) customers while six percent indicated having tightened said standards. The loosening took the form of increasing the maximum size of credit lines, shrinking the spread of loan interest rates over the bank’s cost of funds, lowering the cost of credit lines, loosening loan covenants, and decreasing the premiums charged on riskier loans. Even as the terms and cost of business credit eased, the demand for such loans did not budge significantly on a net basis. Nineteen percent of responding banks reported that demand for commercial & industrial loans from large and middle-market firms was “moderately stronger” while 15.7 percent said that it was “moderately weaker.” 

Other U.S. economic data released over the past week:
Jobless Claims (week ending February 3, 2018, First-Time Claims, seasonally adjusted): 221,000 (-9,000 vs. previous week; -16,000 vs. the same week a year earlier). 4-week moving average: 224,500 (-8.4% vs. the same week a year earlier).

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

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