January US Trade Report showed a small increase in the trade gap but the deficit is likely to decline as petroleum exports accelerate into the next year.
The deficit for traded goods inched up only $100 million in January the Commerce Department reported Friday, rising to $39.1 billion. Both imports and exports each rose 0.6%, exports slowly inching back after a 1.4% drop in December. Some highlights include a less-drastic dip in petroleum exports, China’s economy is slowing and a record high report of capital good imports.
The quarter is still ‘too young’ to see a trend, says Ken Mayland with ClearView Economics. The inflation-adjusted trade deficit for January was worse than the fourth quarter average. This suggests that net foreign trade could be a drag GDP growth in the beginning of 2014.
“Let’s see what happens for February before we draw any firm conclusions,” Mayland added.
Despite an unexpected decline in January for petroleum exports, a look at all of 2013 shows a positive trend for American energy. The report also showed a slowing down Chinese economy and record high reports in capital goods.
Petroleum exports have been increasingly growing steady since March 2013, excluding a small dip in September, another notably slow month. Regardless of the 9.5% decrease from December, petroleum exports are up 28.3% higher than last January. Wells Fargo economist, Tim Quinlan, was not concerned with the decrease.
“Exports for petroleum dropped and imports picked up, but past months show the narrowing of the trade deficit,” Tim Quinlan said.
The trend sheds some optimism for the future months. The expected increase of oil exports suggests an energy independent America down the road.
The US trade deficit with China continued to grow but experts remain fearful of the Chinese economy slowing down and crushing emerging economies which are reliant on the country.
The trade deficit between America and China rose from $27.8 billion to $3.3 billion from last year. China’s slow growth raises some alarm to the global market because if the country were to slow down production, it would prevent them from buying raw materials from other countries like Brazil and South Africa. The trickle down of the superpower’s economy slowing down can crush countries just barely emerging.
While this continuing slowdown may lead to bigger problems for China down the road, a strong partnership with America will still remain. Pessimists fear that with the EU’s economy gradually stabilizing, it will encourage America to import more from Europe rather than China.
The drop in Chinese import was not significant at all, economic analyst Cathy Guo with Stone and McCarthy Research Associates, pointed out. Last year imports from China were at $11.782 million compared to $11.172 million in the last report.
Industrial supplies and materials, capital goods and consumer goods drove the increase in exports. One of the more impressive increases was the record high capital goods at $47.9 billion. This could mean that businesses are investing more and will be spending more in the spring months. After a disappointing job report in March, news like this could encourage businesses to hire knowing that more spending is happening in the economy.
This isn’t to overlook that crude oil is at the lowest it has been since 2011, averaging $90.21 per barrel which could also be pushing the import of capital goods and increase in petroleum imports.
Economists agree that February and March reports will give a better idea of how foreign trade is driving the economy.