Artificial intelligence (AI)-related demand perked up tech exports in November as the monthly trade deficit hit the highest level in about two-and-a-half decades.
U.S. trade deficit swelled to $56.8 billion in November, sharply higher than October’s revised deficit of $29.2 billion, as imports surged month-over-month (MoM) even as exports fell. Economists, on average, had modeled a more modest deficit increase to $43.4 billion.
November’s deficit marked the biggest monthly gap in about 34 years.
What Led To Starker Imbalance: The goods deficit widened by $27.9 billion to $86.9 billion, while the surplus on services trade was up a more modest $0.3 billion to $30.1 billion.
The average three-month deficit was up merely $0.4 billion to $44.7 billion for the three months ended November. The 5.6% MoM drop in exports was attributable to a sharp reduction in non-monetary gold and other precious metal exports. Pharma preparations exports also fell steeply.
On the other hand, goods imports climbed 6.6%, driven by finished pharma goods imports and capital goods imports. Among capital goods computer imports climbed sharply.
Among countries, the deficit with the 27-nation European Union bloc nearly doubled to $14.02 billion, while the trade gap with China reduced slightly to $13.94 billion. Unsurprisingly, the U.S. trade deficit with Taiwan, a key exporter of tech intermediate and final goods, was at nearly $15 billion. The deficit with Mexico was the highest at nearly $18 billion. The U.S. also ran up a huge deficit of $15.5 billion with Vietnam, another major tech exporter.
Read-across For Growth: The wider November deficit could prompt traders to trim their economic growth estimate for the fourth quarter, given net exports, a component used in GDP calculation, was markedly negative in November.
The Atlanta Federal Reserve’s GDPNow forecast based on mathematical modeling of a raft of economic data, including the trade balance released on Thursday, estimates real GDP growth of 4.2%, down from the 5.4% estimated previously.
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