U.S. Trade Deficit Rises for Third Straight Month

The U.S. trade deficit increased 10.4% to $40.2 billion in December, as imports rose faster than exports, the U.S. Commerce Department announced Wednesday.

It was the third straight monthly increase for the trade deficit, the highest since December 2008, and occurred despite the fact that exports rose for the eighth consecutive month. Economist surveyed by Bloomberg News had expected the trade deficit to fall to $35.7 billion from $36.4 billion in November and $33.2 billion in October.In December, exports rose $4.6 billion or by 3.3% to $142.7 billion, while imports, rose $8.4 billion or by 4.8% to $182.9 billion.

Trade Deficit Plunged In 2009

For all of 2009, the trade deficit plunged 45.3% to $380.7 billion, down from $695.9 billion -- a drop largely due to reduced U.S. consumer and business spending.

In December, imports of industrial supplies increased to $21.5 billion from $18.4 billion in November, capital goods increased to $34.9 billion from $33.3 billion, and auto imports increased to $18.3 billion from $16.7 billion. Meanwhile, concerning exports, industrial supplies increased to $28.6 billion from $27.0 billion in November, and capital goods increased to $35.8 billion from $34.0 billion.

The U.S. trade deficit in December with key nations was as follows: China, $18.2 billion, down from $20.2 billion in November; European Union, $6.4 billion, the same as November; OPEC, $6.7 billion, up from $6.1 billion; Japan, $4.6 billion, down from $5.4 billion; Mexico, $5.2 billion, up from $5.1 billion; Canada, $3.0 billion, up from $1.5 billion; Hong Kong, $2.0 billion, up from $1.4 billion, and Russia, $986 million, down from $1.1 billion.

Economic Analysis

In general, a disappointing December trade report. On the bright side, exports continued to rise, aided by the weak dollar. On the downside, the increase in auto imports is a concern: import auto purchases were a major source of the U.S.'s record trade deficit in 2008 and the nation's large annual deficits during much of the previous decade. For the U.S. to begin to record trade surpluses -- and retain more wealth at home -- it must find ways to produce vehicles Americans want. If the nation does, it will lead to hundreds of thousands of new, well-paying industrial jobs.

For the year, the massive 45.3% decline in the trade deficit to $380.7 billion largely reflects the recession, which has eliminated more than 8.4 million jobs in the U.S. and also prompted the ongoing 'frugal consumer' trend.
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