Tehran 29January_The US goods trade deficit increased sharply in December as imports rebounded, and businesses turned more cautious on accumulating inventory, prompting some economists to lower their economic growth estimates for the fourth quarter.
TEHRAN, Young Journalists Club(YJC)_There was also some discouraging news on the housing market on Wednesday, with contracts to purchase previously owned homes dropping by the most in more than 9-1/2 years in December. The housing market has been regaining momentum after slumping in 2018 and the first half of 2019, thanks to lower mortgage rates.
The Federal Reserve cut interest rates three times last year. Officials from the US central bank were due to wrap up a two-day meeting later on Wednesday. They are expected to reiterate the Fed's desire to keep rates unchanged at least through this year.
The Commerce Department said the goods trade gap surged 8.5% to $68.3 billion last month. The goods trade deficit had dropped for three straight months, driven by declining imports.
The overall trade deficit is on track to record its first annual decline since 2013. Economists say the Trump administration's "America First" agenda, underscored by an 18-month trade war with China, has restricted the flow of goods, particularly imports.
Though Washington and Beijing signed a Phase 1 trade deal this month, US duties remained in effect on $360 billion of Chinese imports, about two-thirds of the total.
"Despite a Phase 1 US-China deal, existing tariffs, easing US demand and slow global growth will keep trade sluggish," said James Watson, a senior US economist at Oxford Economics in New York.
In December, goods imports surged 2.9% to $205.3 billion after decreasing 1.3% in November. Imports were boosted by industrial supplies, food, consumer and capital goods. Motor vehicle and parts imports, however, fell last month.
Exports of goods rose 0.3% last month to $137.0 billion after increasing 0.8% in November. There were increases in exports of industrial supplies and capital goods. Exports of consumer goods and motor vehicles and parts dropped. Food exports were unchanged last month.
US financial markets were little moved by the data ahead of the Fed's rate decision.
Q4 growth estimates cut
The sharp widening in the goods trade deficit last month suggests the expected boost to fourth-quarter gross domestic product from trade could be a bit more moderate than initially expected. Still, the overall goods trade deficit was probably smaller in the fourth quarter relative to the July-September period. A smaller trade gap is positive for the calculation of GDP.
Trade subtracted 0.14 percentage point from GDP growth in the third quarter. The Atlanta Fed lowered its fourth quarter GDP estimate to a 1.7% pace from a 1.9% rate. JPMorgan cut its fourth-quarter GDP estimate by three-tenths of a percentage point to a 1.4% rate.
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