December Trade Deficit Up 1.8%, 27% for 2021
RJS, MarketPlace 666, US Trade Deficit Rose 1.8% in December and up 27% in 2021
Our trade deficit rose 1.8% in December as the value of both our exports and our imports increased, but our imports increased by more….the Census report on our international trade in goods and services for December indicated that our seasonally adjusted goods and services trade deficit increased by $1.8 billion to $80.7 billion in December, from a revised November deficit of $79.3 billion, which was previously reported at $80.2 billion….the value of our December exports rose by a rounded $3.4 billion or 1.5% to $228.1 billion on a $2.0 billion increase to $158.3 billion in our exports of goods and a $1.4 billion increase to $69.9 billion in our exports of services, while the value of our imports rose by a rounded $4.8 billion or 1.6% to $308.9 billion on a $5.2 billion increase to $259.7 billion in our imports of goods, which was partly offset by a $0.4 billion decrease to $49.2 billion in our imports of services…with this report, the seasonally adjusted goods data for every prior month of 2020 were revised, which thus means that previously published quarter over quarter figures for GDP would need to be revised as well…export prices were on average 1.8% lower in December, which means the relative real increase in exports for the month was more than the nominal increase by roughly that percentage, while import prices averaged 0.2% lower, meaning the increase in real imports was likewise greater than the nominal dollar increase reported here by that percentage…
The $2.0 billion increase in our December exports of goods largely resulted from greater exports of consumer goods, capital goods and automotive goods, which were partly offset by lower exports of foods, feeds and beverages…referencing the Full Release and Tables for December (pdf), in Exhibit 7 we find that our exports of consumer goods rose by $1,241 million to $21,946 million on a $1,046 million increase in our exports of pharmaceutical preparations, and that our exports of capital goods rose by $887 million to $45,020 million on a $632 million increase in our exports of engines for civilian aircraft….in addition, our exports of automotive vehicles, parts, and engines rose by $779 million to $12,994 million on a $750 million increase in our exports of new and used passenger cars and a $322 million increase in our exports of automotive parts other than engines, chassis, and tires, and our exports of industrial supplies and materials rose by $463 million to $57,617 million as a $1,154 increase in our exports of non-monetary gold and a $556 increase in our exports of crude oil was partially offset by a a $556 million decrease in our exports of natural gas liquids and a $385 million decrease in our exports of petroleum products other than fuel oil….partly offsetting the increases in those export categories, our exports of foods, feeds and beverages fell by $1,074 million to $14,143 million, led by a $472 million decrease in our exports of soybeans, and our exports of those goods not categorized by end use fell by $179 million to $5,898 million…
Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that greater imports of consumer goods, of automotive vehicles, parts, and engines, and of capital goods more than accounted for our $5.2 billion increase in imports, as their big increases were partly offset by lower imports of imports of industrial supplies and materials and of foods, feeds, and beverages….our imports of consumer goods jumped by $5,181 million to $71,906 million on a $2,361 million increase in our imports of cellphones, a $1,037 million increase in our imports of toys, games, and sporting goods, a $589 million increase in our imports of appliances, a $364 million increase in our imports of furniture and related household goods, and a $345 million increase in our imports of cotton apparel and household goods, while our imports of automotive vehicles, parts and engines rose by $2,409 million to $30,938 million on a a $1,386 million increase in our imports of new and used passenger automobiles, a $593 million increase in our imports of automotive parts other than engines, chassis, and tires, and a $336 million increase in our imports of trucks, buses, and special purpose vehicles….in addition, our imports of capital goods rose by $2,323 million to $67,715 million on a $575 million increase in our imports of telecommunications equipment, a $479 million increase in our imports of computers, a $413 million increase in our imports of electric apparatuses. a $406 million increase in our imports of computer accessories, and a $372 million increase in our imports of semiconductors….partly offsetting the increases in those import categories, our imports of industrial supplies and materials fell by $3,245 million to $60,119 million on a $1,202 decrease in our imports of crude oil, a $692 decrease in our imports of finished metal shapes, and a $673 million decrease in our imports of agricultural chemicals and fertilizers, while our imports of foods, feeds, and beverages fell by $760 million to $15,705 million on decreases in imports of meat & meat products, food oils & oilseeds, and several other food and beverage line items, while our imports of goods not categorized by end use fell by $563 million to $11,710 million…
For the year, the revised trade figures now show that this year’s trade deficit increased by $182.4 billion, or by 27.0% to $859.1 billion from 2020, on a $396.4 billion or 18.5% increase in exports and a $576.5 billion or 20.5% increase in imports….the year over year increase in our exports was driven by increased exports of services, industrial supplies and materials, capital goods, and consumer goods, and was led by a $26.8 billion increase in exports of business services other than financial services and insurance, a $25.2 billion increase in exports of petroleum products other than fuel oil, a $24.1 billion increase in exports of pharmaceuticals, a $21.2 billion increase in exports of natural gas and a $19.9 billion increase in exports of crude oil….meanwhile, the 2021 increase in our imports was driven by increased imports of industrial supplies and materials, capital goods, consumer goods and of services, and was led by a $56.3 billion increase in our imports of crude oil, a $32.1 billion increase in our imports of transportation services, a $22.9 billion increase in our imports of cell phones, a $22.0 billion increase in our imports of automotive parts and accessories other than engines, chassis, and tires, and a $20.8 billion increase in our imports of travel services…
The press release for this month’s report also summarizes Exhibit 19 in the pdf, which gives us surplus and deficit details on our goods trade with selected countries…
The December figures show surpluses, in billions of dollars, with South and Central America ($5.4), Hong Kong ($1.9), Brazil ($1.2), Singapore ($0.8), and United Kingdom ($0.6). Deficits were recorded, in billions of dollars, with China ($34.1), European Union ($16.3), Mexico ($11.0), Germany ($5.3), Japan ($5.0), Canada ($4.2), India ($3.9), Taiwan ($3.8), South Korea ($3.7), Italy ($3.1), France ($0.8), and Saudi Arabia ($0.7).
- The deficit with China increased $6.0 billion to $34.1 billion in December. Exports decreased $2.2 billion to $11.8 billion and imports increased $3.8 billion to $45.9 billion.
- The deficit with South Korea increased $1.4 billion to $3.7 billion in December. Exports decreased $0.9 billion to $4.8 billion and imports increased $0.5 billion to $8.5 billion.
- The deficit with the European Union decreased $3.0 billion to $16.3 billion in December. Exports increased $0.7 billion to $25.1 billion and imports decreased $2.4 billion to $41.4 billion.
In the advance estimate of 4th quarter GDP published two weeks ago, our December trade deficit was estimated based on the sketchy Advance Report on our International Trade in Goods which was released just before the GDP release…that report estimated that our seasonally adjusted December goods trade deficit was at $100,960 million on a Census basis, on goods exports of $157,302 million and goods imports of $258,263 million…this report revises that and shows that our actual Census basis goods trade deficit in December was at $100,474 million, on adjusted goods exports of $157,618 million and adjusted goods imports of $258,092 million…at the same time, the November goods trade deficit was revised down from the $98,040 million indicated in that advance report to $97,323 million, and the October goods trade deficit was revised down from $83,106 million to $82,490 million…combined, those revisions from the previously published figures would suggest that the 4th quarter trade deficit in goods was roughly $1,819 billion less than was accounted for in the GDP report, or around $7.3 less greater on an annualized basis, which would add about 0.10 percentage points to 4th quarter GDP when the 2nd estimate is released at the end of this month….
Note that our trade in goods for July, August, September and October, which all go into figuring the quarter over quarter change in 4th quarter GDP, were also revised with this report as well, and since our GDP growth rate is a measure of the change from one quarter to the next, we should also be adjusting for changes in those months as well to get an accurate 4th quarter GDP read…however, the BEA will not revise 3rd quarter GDP figures until the annual revision this coming summer, so the 4th quarter GDP report that will be published at the end of March will not reflect the revised 3rd quarter trade figures included herein….however, since this month’s revisions are due to changes in the seasonal adjustments, the net trade deficit for the entirety of 2020 should not be affected…also note that the BEA only publishes a single line estimate of exports and imports for each month on a seasonally adjusted annual rate basis with no indication as to how they arrive at those figures…there is no equivalent annual rate data for services in this report…
In macroeconomics, the twin deficits hypothesis or the twin deficits phenomenon, is the observation that theoretically, there is a strong causal link between a nation’s government budget balance and its current account balance.
[Then Wiki has definitions, an algebraic proof, and examples. Skipping by that but you can take the link and moving on to the bottom line.]
…What we can gather from this is the understanding of why an increased budget deficit goes up and down in tandem with the Trade Deficit. This is where we derive the appellation the Twin Deficits: if the US budget deficit goes up then either household savings must go up, the trade deficit must go up, or private investment will decrease.
However, the implication that rising fiscal deficits lead to increased trade deficits should be a non sequitur. OTOH, one might easily reverse the direction of causation sensibly enough.
What might have confused the Wiki author was the nature of twin deficits when they exist for a sovereign that has the dominant international reserve currency like US. The fiscal deficits caused by our trade deficits allow our surplus trading partners to bid up our sovereign debt keeping our currency from losing FOREX value against their currency. This the curse of exorbitant privilege, Triffin’s Dilemma.
Ron, i agree that there is a strong causal link between a nation’sgovernment budget balance and its current account balance; but there’s another part of that equation…
this graphic shows it clearly: https://en.wikipedia.org/wiki/Sectoral_balances#/media/File:Sectoral_Financial_Balances_in_U.S._Economy.png
that was one of Rebecca Wilder’s key observations when she used to post at AB..
Certainly. We know that we have a substantial inflow of US dollars coming back to the US from our surplus trading partners into Treasuries which is the means by which they can keep the value of their own currencies low against the USD while simultaneously running trade surpluses with the US. We also know that US corporate profits have been growing faster than US wages even when profits are largely realized from IP for which the productive investment is primarily offshore.
So, even though the flows balance then the stock has shifted more towards sovereign debt instruments, speculation, financialization, and rentier capitalism than investment in domestic production and jobs creation.
Off Shoring = Overhead Avoidance.
increased $6.0 billion to $34.1 billion in December.
since rocket scientist demonstrated to Deng Xiaoping that per capita GDP could be doubled by halving the population there is hardly a week that goes by workout hearing amazing things from China. before Deng the entire Realm was no more than thieves robbing thieves but no one getting any productive work done.
by now our rulers should have their ears on, should be alert to this economic mechanism of
We should do something about providing free vasectomies to countries who are struggling from where China was in the sixties.
can we continue to enjoy our trade imbalance with China by simply printing more money for export to Chinese in exchange for their goods and services? that depends on whether we print too much. at the moment we are definitely over printing and we have been warned by Mohamed el-erian, by Jeffrey gundlach and by many other important people, but our rulers have ignored the warnings.
our M2 money stock is still expanding by more than 11% per annum as our inflation rate is creeping slowly up towards the same number, if this continues for another 4 weeks we will lose forever our exceptional privilege of being the printers of the global reserve currency.