U.S. growth in Q4 likely stronger on export gains

WASHINGTON — The U.S. trade deficit narrowed sharply in December because exports rose while oil imports plummeted. The smaller trade gap means the economy almost surely grew in the October-December quarter — an improvement from the government’s estimate last week that it shrank in the final months of 2012.

The trade deficit fell nearly 21 percent in December from November to $38.6 billion, the Commerce Department said Friday. That’s the smallest in nearly three years.

Exports rose 2.1 percent to $186.4 billion. Exports of oil and other petroleum products rose to the highest level on record. Overseas shipments of agriculture goods and aircraft also increased.

Imports shrank 2.7 percent to $224.9 billion. Oil imports plunged to 223 billion barrels, the fewest since February 1997.

“All this is encouraging and … it now looks like exports will continue to strengthen as the year goes on,” said Paul Ashworth, an economist at Capital Economics. A survey of U.S. manufacturers, released last week, showed export orders grew in January for the second straight month.

A narrower trade gap boosts growth because it means U.S. companies earned more from overseas sales while consumers and businesses spent less on foreign products.

Fewer exports were one of the reasons the government’s first estimate of economic growth in the October-December quarter showed a contraction at an annual rate of 0.1 percent. The December trade deficit figures were not available when the government reported its estimate last week.

Jim O’Sullivan, chief U.S. economist at High Frequency Economics, estimates the improved trade picture will add 0.7 percentage point to economic growth in the October-December quarter.

Still, sluggish restocking by companies and deep cuts in defense spending are expected to keep fourth-quarter growth weak. And a separate Commerce report Friday showed wholesale stockpiles declined in December, which could offset some of the gain from trade.

Economists at Barclays Capital on Friday expect growth to be revised up to an annual rate of 0.3 percent in the October-December quarter. The government will issue its second estimate for fourth-quarter growth on Feb. 28.

For all of 2012, the trade deficit narrowed 3.5 percent to $540.4 billion.

Many economists believe that trade will give the economy a small lift in 2013. That forecast is based on an assumption that the European debt crisis will stabilize, helping boost U.S. exports to that region, and economic growth in Asia will continue to rebound.

The politically sensitive trade deficit with China rose to $315.1 billion last year, the largest on record with any country. That could add to pressure on the Obama administration and Congress to take a harder line on China’s trade practices. Some U.S. manufacturers contend that China keeps the value of its currency artificially low to make its exports to the U.S. cheaper.

“The record trade deficit with China will not disappear on its own,” said Scott Paul, president of the Alliance for American Manufacturing. “Congress and the Administration must take on currency manipulation … as well as China’s persistent cheating on its trade obligations.”

More in Herald Business Journal

Peoples, HomeStreet banks bump lowest salaries after tax cut

The banks with Snohomish County branches will raise minimum salaries for employees to $15 an hour.

Electroimpact cuts Mukilteo staff by 9 percent

“What we’re missing now is a monster anchor project,” the company’s VP said.

Exotic animals find compassionate care in Bothell (video)

At the Center for Bird and Exotic Animal Medicine, vets treat snakes, hedgehogs and even kangaroos.

How can you tell if you are getting good financial advice?

Assume that it’s still the same buyer-beware market that has always existed.

Amanda Strong (left) tries on an Angel of the Winds Arena hat as she and Courtney Brown hand out gift bags after the renaming ceremony Dec. 13 in Everett. The new name replaces the Xfinity name. (Andy Bronson / Her file)
Angel of the Winds to break ground on $60M casino expansion

“We think we’re on the cusp of becoming a major resort.”

In this Dec. 20, 2017, photo, a clerk reaches to a shelf to pick an item for a customer order at the Amazon Prime warehouse, in New York. (AP Photo/Mark Lennihan, File)
Amazon’s potential HQ2 sites leaves many cities disappointed

And yet, some municipal leaders are looking at the bright side of being rejected.

How do you retrieve an errant Boeing 737 from a muddy slope?

Turkish authorities used cranes to lift a plane that skidded off a runway.

Don’t take economic forecasts to the bank — or the casino

Air travel delays could spur a rebirth of passenger rail service.

Emirates orders 20 more Airbus A380 jumbos, saving program

The Dubai carrier also has options to buy 16 more. The program seems safe until 2029.

Most Read