The U.S. trade deficit increased in December proving that the U.S. economy, especially consumer spending, remains strong.
The trade deficit for goods and services in December grew to $62.2 billion, increasing by $0.3 billion over the revised November figure of $61.9 billion, according to Wednesday’s report released by the U.S. Census Bureau and the Bureau of Economic Analysis.
The data shows that for the month of December, the U.S. exports reached $258.2 billion. While the US spent $320.2 billion in imports.
It was a sharp decline from December of 2022, with a deficit decrease from $951.2 billion to $773.4 billion.
Despite a decrease in imports in the month of December, in comparison to December 2022 numbers, the Real Gross Domestic Product report for the fourth quarter of 2023, showed an increase rate of 3.3 percent, proving that consumer spending has not slowed down.
“The trade numbers are a function of consumer spending and what we know is that consumer spending continues to be strong from all the other indications we have,” said Steven Ricchiuto from Mizuho Securities.
Given the strength of the U.S. economy, imports should have increased more strongly, said Chris Low. But he said, moves by the Biden Administration to meet climate change goals could result in a restriction on natural gas exports that could reduce exports.
Low was also surprised to see that overall in 2023 exports increased by 1.2 percent and imports decreased by 3.6 percent. Although he says that might change soon in the first months of the new year.
A new bill proposed by the Biden administration, at the end of January, has temporarily paused pending decisions for liquefied natural gas exports to countries that are not part of the Free Trade Agreement, in an attempt to de-escalate climate change effects.
In November 2023, non-Free Trade Agreement countries made up 89.6 percent of the total of liquefied natural gas exports. The rest went to Free Trade Agreement countries, according to a statement released by the US Department of Energy.
The US tops the list as the number one producer in the world of liquified natural gas exports, according to the US Department of Energy. In November 2023, the Office of Fossil Energy and Carbon Management reported 389.4 BcF in net exports.
For 2023, exports went up by $35 billion from the previous year. On the other hand, imports went down by $142.7 billion from 2022.
This can be attributed to the deficit with China, which decreased $102.9 billion to $279 billion in 2023.
In 2021, China was responsible for 15.5 percent of total US imports, according to the International Trade Administration. In 2022, it went down to 14.2 percent. U.S. dependency on China has slowly been decreasing.
It was a turning point as imports from China decreased, imports from Mexico increased. In turn, the deficit with Mexico increased $21.9 billion to $152.4 billion in 2023.
While the trajectory of the US economy remains uncertain, for now it remains on a healthy incline.
