US Trade Deficit in Goods Soars to Record Figures With Faster Economic Recovery

US Inventories rose rapidly as businesses sought to stock up for the holiday shopping season. Container ships are anchored off the ports of Long Beach and Los Angeles to unload imported goods.

The trade deficit in goods surged by 17.5% in November to set an all-time high, largely reflecting faster improvement in the U.S. economy compared to most other countries.

An early or advanced look at the trade gap in goods showed that it increased to $97.8 billion in November from $83.2 billion in October, the U.S. Census Bureau said. The U.S. is on track in 2021 to post its biggest annual shortfall on record.

Data released on Wednesday showed sky-rocketing home prices are weighing on the possibility of home ownership while the goods trade deficit – the chasm between imports and exports – yawned to its widest ever.

Signed contracts for the sales of pre-owned U.S. homes (USNCH=ECI) unexpectedly dropped by 2.2% last month, according to the National Association of Realtors (NAR). read more

The reading marked a reversal from October’s 7.5% surge and defied the 0.5% increase analysts expected.

Pending home sales, along with building permits and applications for loans to purchase homes, is among the sector’s most forward-looking indicators, and provides further evidence that the housing market is beginning to buckle under the weight of its own success.

The pandemic sent homebuyers scurrying to the suburbs in a mad grab for elbow room and home office space, sending available homes on the market to record lows. That, in turn, has launched home prices into the stratosphere, a phenomenon illustrated by yesterday’s Case-Shiller report.

This has resulted in evaporating affordability for many potential buyers, particularly at the low end of the market.

Buyer competition alone is unrelenting, but home seekers have also had to contend with the negative impacts of supply chain disruptions and labor shortages this year. These aspects, along with the exorbitant prices and a lack of available homes, have created a much tougher buying season.

It should be noted, however, pending home sales data remains well above pre-pandemic levels, as illustrated by the graphic below:

Separately, the Commerce Department released its advance take on trade balance and wholesale inventories for November.

The report showed the gap between the value of merchandise imported from abroad versus domestic goods exported to U.S. trading partners (USGBAL=ECI) widened by nearly 18% to a record $97.78 billion, wiping out the narrowing of the deficit witnessed in October. read more

As the U.S. economic recovery from the global health crisis outpaces much of the world, and with the dollar steadily gaining strength since September – which has made American-made goods more expensive – the trade deficit has weighed on GDP for the last five consecutive quarters.

Looking ahead, it is expected the trade deficit to remain historically elevated until pandemic worries ease. Rising Covid cases abroad once again threaten to constrain global demand, risking an even wider deficit if export growth slows more than imports.