The nominal trade deficit grew by $2.68 billion in December as imports grew more than exports. The December nominal trade deficit was the highest since October 2008.
The real goods trade deficit expanded by $1.99 billion in December compared to November as real goods exports increased 2.6% month-over-month and real goods imports grew 2.7% month-over-month. December’s real goods trade deficit of $68.5B is the largest since March 2007. With December’s real goods trade deficit coming in higher than expected, Q4 real GDP is likely to be revised down in the second estimate, as net exports will be more detractive to GDP growth.
Nominal levels of exports and imports recently returned to all-time highs as a healthy domestic economy has supported imports and a weaker dollar along with growth overseas has supported exports. While we do not expect net exports to be a significant contributor to real GDP growth in the coming quarters, strong domestic demand should continue to drive GDP growth in the form of personal consumption. Recent international trade data has signaled that the U.S. consumer remains strong, as imports of consumer goods grew 12.1% year-over-year, the fastest pace since 2015.