December 7, 2021
By Lucia Mutikani
Washington (Reuters) – The US trade deficit could shrink sharply in October as exports surged to record highs, establishing trade that will contribute to economic growth this quarter for the first time in more than a year.
The Commerce Department said Tuesday that the trade gap plunged 17.6% to $ 67.1 billion. This was the largest decline since April 2015. Economists polled by Reuters predicted a $ 66.8 billion deficit.
Christopher Lupkey, Chief Economist at FWD BONDS in New York, said:
Exports accelerated 8.1% to a record high of $ 223.6 billion. This surge was driven by record exports of goods, up 11.1% to $ 158.7 billion. Industrial goods and materials exports increased $ 6.4 billion and crude oil shipments increased $ 1.2 billion.
Exports of capital goods increased by $ 3.1 billion, boosted not only by commercial aircraft but also by other industrial machinery. Food exports increased $ 2.1 billion and soybeans increased $ 1.8 billion.
Exports of consumer goods surged $ 1.6 billion. This is due to increased shipments of diamonds for gems, automobiles, parts and engines. The country exported more services, which increased by $ 1 billion to $ 64.9 billion. This reflects increased royalties for travel abroad, other business services, and intellectual property.
Export surges surpassed $ 290.7 billion, a 0.9% increase in imports, a record high. Commodity imports increased 0.7% to a record $ 242.7 billion. This rise was driven by an increase of $ 1.5 billion in automobiles, parts and engines. Imports of consumer goods, including mobile phones and other household items, also increased.
Due to the decline in semiconductors and commercial aircraft, imports of industrial goods and materials have decreased as well as imports of capital goods.
Inflation-adjusted October deficit decreased $ 13.5 billion to $ 97.6 billion. This was the smallest so-called real deficit since December last year. If the real goods trade deficit continues to shrink, trade could contribute to gross domestic product this quarter. The trade gap has been a drag on GDP growth for the fifth straight quarter.
Mahir Rashid, an economist at Oxford Economics in New York, said: “But Omicron variants are a significant downside risk that could distort trade flows by delaying global recovery in early 2022.”
The economy is regaining speed after being curbed in the third quarter by a deficiency caused by Delta variants and a relapse of COVID-19 infection. Supply chain roaring shortages caused by the coronavirus are fueling price pressure.
There are signs that inflation may have been well above the Federal Reserve’s target of 2% for some time, as companies competing for workers are raising wages.
Another report from the Ministry of Labor on Tuesday showed that unit labor costs, or labor prices per unit of production, soared more than originally thought in the third quarter. Labor costs accelerated at an annual rate of 9.6% in the previous quarter, up from the 8.3% pace reported in November.
(Graphics: Historical decline in productivity, https: //graphics.reuters.com/USA-ECONOMY/RECESSIONTEMPLATE/gkplgldylvb/chart_eikon.jpg)
It rose at a pace of 5.9% in the April-June quarter. Labor costs increased by 6.3% compared to a year ago, instead of the previously reported 4.8%. Economists predicted that unit labor costs for the previous quarter would rise at an uncorrected 8.3% pace.
Hourly wages increased by 3.9% in the third quarter instead of the previously reported 2.9%.
The surge in labor costs came at the expense of worker productivity, but fell at a downwardly revised rate of 5.2% in the previous quarter. Previously, productivity was reported to decline at a pace of 5.0%. It grew at a pace of 2.4% in the April-June quarter.
Compared to the third quarter of 2020, productivity fell by a rate of 0.6%. Previously it was reported to decrease at a rate of 0.5%. Working hours increased by 7.4% in the previous quarter, up from the previously estimated 7.0 pace.
(Report by Lucia Mutikani, edited by Andrea Ricci)
U.S. trade deficit shrinks as exports surge to record highs
Source link U.S. trade deficit shrinks as exports surge to record highs