Due to the government shutdown, we are just now getting the Goods and Services Trade Report for December 2018.

Exports, Imports, and Balance

December exports were $205.1 billion, $3.9 billion less than November exports. December imports were $264.9 billion, $5.5 billion more than November imports.

The December increase in the goods and services deficit reflected an increase in the goods deficit of $9.0 billion to $81.5 billion and a decrease in the services surplus of $0.5 billion to $21.8 billion.

For 2018, the goods and services deficit increased $68.8 billion, or 12.5 percent, from 2017. Exports increased $148.9 billion or 6.3 percent. Imports increased $217.7 billion or 7.5 percent.

Year-over-year, the average goods and services deficit increased $6.2 billion from the three months ending in December 2017.

Imports vs Exports

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By Country

  • China: The deficit with China increased $3.2 billion to $38.7 billion in December. Exports increased $0.4 billion to $7.7 billion and imports increased $3.6 billion to $46.4 billion.
  • Mexico: The deficit with Mexico increased $2.1 billion to $8.8 billion in December. Exports decreased $1.3 billion to $21.1 billion and imports increased $0.8 billion to $29.9 billion.
  • Canada: The deficit with Canada decreased from .8 billion to .7 billion. Exports fell by $0.5 billion while imports fell by $0.6 billion.

By Country 2018 Totals

  • China: The deficit with China increased from $375.6 billion to $419.2 billion. Exports fell from $129.9 billion to $120.3 billion. Imports rose to $539.5 billion from $505.4 billion.
  • Mexico: The deficit with Mexico increased from $70.9 billion to $81.5 billion. Exports to Mexico rose from $243.3 billion to $265.0 billion. Imports from Mexico rose from $314.3 billion to $346.5 billion.
  • Canada: The deficit with Canada increased from $17.1 billion to $19.8 billion. Exports rose from $282.3 billion to $298.7 billion. Imports rose from $299.3 billion to $318.5 billion.

Econoday Highlights

Revision estimates for fourth-quarter GDP will be coming down following an unexpectedly deep $59.8 billion trade deficit in December. Not helping the quarterly deficit are downward revisions to November and October that deepened the net deficit in those two months by $1.6 billion.

The trouble is equally severe on both sides of the report as exports in December fell 2.8 percent to $205.1 billion and imports rose 2.4 percent to $264.9 billion.

Food is the standout negative with imports at a record $12.6 billion in the month and exports, at $9.6 billion, the lowest monthly total since August 2010. This looks like a smoking gun over tariff tensions with China which may well have cut back its U.S. purchases.

The bilateral trade deficit with China for full year 2018 came in at just over $419 billion, which is much deeper than deficits of $375 and $347 billion in the prior two years.

Exports of services failed to help out December, unchanged at a still very strong $69.5 billion with imports of services, however, rising 1.0 percent in the month to $47.7 billion. Turning back to goods trade, vehicles are another major weakness with monthly exports at $12.3 billion for a second month and the lowest since September 2017 with imports of $32.1 billion at a record high.

Today's headline $59.8 billion deficit is the deepest of the expansion, since October 2008. It is also $1.4 billion beneath Econoday's consensus range and $2.2 billion deeper than the consensus. Net exports had only been a small drag in last week's initial estimate for fourth-quarter GDP but today's report is pointing to a more significant one. One final detail, the nation's total trade gap in 2018 came to $621.0 billion, 12.4 percent deeper than $552.3 in 2017 and the deepest since 2008.

Trump Under Pressure

Trump is under immense pressure to work out a deal with China.

Expect an announcement by Trump of the greatest trade deal in US history.

But expect the actual results to be worth little to nothing.

Mike "Mish" Shedlock

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