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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.

Key Quotes:

“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.”