US Trade Deficit Narrowed in November

After eliminating the effects of price fluctuations, which generates the numbers used to calculate gross domestic product, the trade deficit narrowed to US$59.6 billion in November from US$61 billion the previous month.

However, the ADP data tends to overstate job gains in December because of a year-end accounting quirk.

“A temporary drop in the deficit; expect a December rebound”, said Ian Shepherdson, chief economist at Pantheon Economics, in a client note.

The U.S. central bank last month raised its benchmark overnight interest rate by 25 basis points to between 0.25 per cent and 0.50 per cent, the first rate increase in almost a decade.

Economists polled by Reuters had forecast the trade gap widening to US$44.0 billion in November.

The November deficit fell 5 per cent to $42.4 billion, the Commerce Department reported Wednesday. Although much of the drop in imports is likely to have been down to inventories, it could also be indicative of a slowdown in domestic demand.

Canada’s trade surplus with the United States increased to $2.1 billion in November from $1.7 billion in October. Businesses accumulated a record pile of inventory in the first half of 2015, which was unmatched by demand, leaving warehouses bulging with unsold goods.

Export volumes gained 0.7 per cent as prices dropped 0.4 per cent, while import volumes fell 1.6 per cent as prices increased 0.9 per cent. Overall goods imports fell to US$183.5 billion, the lowest level in almost five years. The cost of many major commodities have fallen, causing USA imports of industrial supplies and materials to fall in November to the lowest level in more than six years. The price of petroleum averaged US$39.24 per barrel in November. Energy exports slumped by 6.6% to hit their lowest since May 2009.

Exports of goods and services fell 0.9 per cent to US$182.2 billion in November, the lowest since January 2012.

Imports from Canada, another major supplier of oil, fell to the lowest level in five years.

The decline in exports to the United States’ main trading partners was almost broad-based in November.

With just one month left in 2015, the deficit totalled $488 billion for the year, 5 per cent higher than the same period in 2014.