What can US trade deficit figure tell about US economy?

The US trade deficit deepened to a record in 2022 on surging imports as most US companies jostled and rushed so early to avoid having insufficient goods, and instead, hurried their imports beforehand in order to meet demand.

The value of imports last year climbed 16.3% from 2021 to nearly $4 trillion, while exports of goods and services rose 17.7% to $3 trillion.

The annual shortfall in goods and services increased 12.2% to $948 billion according to the Commerce Department’s data released on Tuesday. The December gap widened to $67.4 billion from the prior month. The figures aren’t adjusted for prices.

The record imports figure in 2022 partly indicates the push by retailers to refill inventories well ahead of peak selling periods and avoid a repeat of shortages and supply-chain delays that stopped West Coast ports in 2021. A robust job market and pent-up savings from government stimulus programs have helped to keep consumer spending resilient.

US recession risks have climbed amid tighter policy, including increased odds that household spending will cool. Americans are sour on the economy’s prospects, with about four in 10 expecting unemployment to rise.

While US companies and consumers benefited from a strong dollar through much of 2022, which makes foreign-made goods more competitive, it has weakened notably over the past three months.

Industrial supplies such as oil topped the list of imports and exports for the year amid a surge in energy prices, followed by capital goods and consumer merchandise.

The annual goods shortfall with China widened 8.3% to a four-year high of $382.9 billion, while the deficit with the European Union shrank to just under $204 billion.