Data released on Friday showed a modest reduction in the trade deficit in December to $66.600 billion. Analysts at Wells Fargo point out trade flows continued to recover in December, they warn that despite the increase exports remain constrained.
“Exports were particularly strong to end the quarter, but imports also held their ground. December’s report confirms what we already know from last week’s Q4 GDP data; net exports subtracted roughly 1.5 percentage points from overall GDP growth in the quarter. Today’s report suggests net exports will likely be a neutral force in the first quarter and may even provide a modest boost to GDP growth.”
“Total exports advanced 3.4% in December to $190.0 billion. Most of the growth was on the merchandise or goods side (+4.7%), while services (+0.5%) continue to struggle amid restrictions associated with the virus.”
“Even with the sizable gain in December, exports remain constrained. Total exports remain roughly 9% below their pre-virus February 2020 level as global growth has been slower to recover amid renewed COVID restrictions and outbreaks.”
“Imports also advanced a strong 1.5% to $256.6 billion in December. Growth in imports were more evenly balanced, as services imports (+1.8%) modestly outpacing goods (+1.5%). Still, services imports remain bogged down by restrictions on activity and it is unlikely we see a full recovery in this component until vaccines are widely administered.”