Increased interest rates have an impact on trade as imports and exports experience an unforeseen decline, suggesting potential changes in the economic outlook.
November saw a surprise reduction in the U.S. trade deficit, with both imports and exports dropping, indicating the influence of heightened interest rates on the nation’s economic situation, according to a report released by the Commerce Department on Tuesday.
Contrary to predictions by analysts of a slight widening of the trade deficit, the gap shrank to $63.2 billion, down from the adjusted October figure of $64.5 billion. The unexpected robustness in U.S. consumption has supported trade, but the looming impact of increased interest rates, which tends to suppress demand, has placed pressure on imports.
During November, U.S. exports experienced a $4.8 billion decrease, amounting to $253.7 billion, while imports saw a steeper decline of $6.1 billion, reaching $316.9 billion. The reduction in exports was attributed to a $3.6 billion drop in goods, notably industrial supplies and materials such as crude oil and nonmonetary gold.
U.S. trade deficit tumbled 11.5 percent in November to less than $50 billion — the lowest level since June — while the politically sensitive trade gap with China for goods fell 7.3 percent, to $35.4 billion https://t.co/NkKGErVL38 pic.twitter.com/tgoYbwvNo2
— CBS News (@CBSNews) February 6, 2019
Imports of goods also witnessed a decline, especially in consumer products such as cell phones and pharmaceutical preparations. According to the Commerce Department, the U.S. goods deficit with China narrowed by $2.4 billion to $21.5 billion in November.
Rubeela Farooqi, Chief U.S. Economist at High Frequency Economics, pointed out that the trade deficit has, on average, been wider in the fourth quarter compared to the third. She commented on the outlook, stating, “The trajectory for demand and growth should slow, both domestically and abroad, indicating a likely moderation in trade flows going forward.”
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