US trade deficit climbs unexpectedly

US Trade Deficit

It's early days but the initial signs are not looking good for the US economy. Last week it was revealed that a surprise rise in US job losses had occurred over December as employers unexpectedly cut 85,000 jobs, and now it's been announced the US trade deficit widened sharply in towards the end of 2009.

Over November the trade gap increased ironically as a result of the recovering economy as demand for imported goods was boosted to its highest in almost a year.

The BBC reports that the deficit grew to $36.4 billion, up 9.7 percent from an upwardly revised figure of $33.2 billion in October.

The November deficit was bigger than Wall Street expectations for a $34.7 billion shortfall.

Straight months of gain

While exports have registered seven straight months of gains as economic growth has returned, the rise in oil prices has brought the trade deficit back up. After a temporary dip in October, oil imports rebounded in November.

Imports totalled $174.6 billion, up by 2.6 percent from the previous month, while exports totalled $138.2 billion, up 0.9 percent.

The poor state of the US dollar helped boost exports, especially to China where the trade gap is watched extremely closely by analysts. It narrowed to $20.2 billion from $22.7 billion in October.

Increased demand for industrial material and consumer goods was responsible for the large hike in imports, a rise so steep in fact that it easily offset a fall in demand for foods and cars.

Imports and exports increased

Economists were encouraged by the fact that both imports and exports increased.

"The big news is continued and sustained growth in trade volume, signalling recovery both in the US and among major US trading partners," said Christopher Cornell, at Moody's Economy.com.

The growth in US trade deficit brings with it mixed signals as the widening gap also signifies a domestic economic recovery. But a full recovery will be extremely slow in coming, and 2010 may bring more despair before we see genuine hope.

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