CONCLUSION 3-Robust imports drive US trade deficit to record high in 2021
The U.S. trade deficit hit a record high in 2021 as imports rose sharply as businesses restock shelves to meet robust domestic demand.
The sharp increase in the trade gap reported by the Commerce Department on Tuesday primarily reflects a shift in spending toward goods from services during the COVID-19 pandemic. With companies keen to replenish depleted stocks amid strained global supply chains, the deficit is unlikely to shrink much this year, which will reduce economic growth. “The need to replenish inventories in the United States will keep imports strong even as domestic demand shifts back to services,” said Tim Quinlan, senior economist at Wells Fargo in Charlotte, North Carolina. “Ultimately, as domestic demand begins to slow and the global recovery continues, we expect trade to become more of a neutral force on growth next year.”
The trade deficit rose 27.0% last year to an all-time high of $859.1 billion. It was $676.7 billion in 2020. The trade deficit was 3.7% of gross domestic product, down from 3.2% in 2020. The deficit subtracted 1.39 percentage points from GDP growth the last year.
The economy grew 5.7% in 2021, the strongest since 1984, after the government provided nearly $6 trillion in pandemic relief, fueling consumer spending on goods. The goods deficit hit a record $1.1 trillion last year, up from $922 billion in 2020. Goods imports hit a record high of $2.9 trillion.
They were driven by imports of industrial supplies and materials, which reached their highest level since 2014. Food imports were the highest on record, as were those of capital goods, consumer goods and others. There were record imports from 70 countries in 2021, led by Mexico, Canada and Germany.
Robust import growth overshadowed a sharp rebound in exports. Goods exports jumped 23.3% to a record $1.8 trillion. Exports of industrial supplies and materials, food, consumer goods, other goods and petroleum were the highest on record. REBOUND IN EXPORTS
The United States recorded record exports to 57 countries last year, led by Mexico, where they rose to $276.5 billion. Shipments to China increased 21.4% to $151.1 billion. But with imports from China rising 16.5% to $506.4 billion, the politically sensitive trade deficit with Beijing narrowed to $355.3 billion last year from $310.3 billion. in 2020. Under the administration of former President Donald Trump, China has pledged to buy more goods from the United States. . However, it fell short of targets under the “Phase 1” trade deal signed in January 2020 to halt an escalating tariff war on Chinese goods launched by Trump in 2018. The purchase commitments have expired at the end of 2021.
“Goods imported from China would create a lot of jobs if the country could produce them here, but with American wages soaring as far as the eye can see, American manufacturers are unlikely to restart their factories here, especially for consumer goods where margins are tight”. said Christopher Rupkey, chief economist at FWDBONDS in New York. In a final surge in the trade deficit for the year, the December deficit rose 1.8% from the previous month to $80.7 billion. Economists polled by Reuters had forecast a deficit of $83.0 billion in December.
The weaker-than-expected widening of the deficit reflects a $1.4 billion increase in services exports, which were boosted by travel and transportation. He suggested the government could raise its estimate of GDP growth in the fourth quarter, when it releases its first revision later this month. Trade made no contribution to the annualized GDP growth rate of 6.9% last quarter. It had shrunk from growth for five straight quarters.
The trade in goods deficit rose 3.2% to $101.4 billion in December, marking a record high. In December, imports of goods jumped 2.0% to a record high of $259.7 billion. Records were reached for imports of capital and consumer goods. Part of the increase in imports likely reflects the unloading of goods after being delayed for months on ships at US ports due to labor shortages. Port backlogs remain high, suggesting that merchandise imports could hit a new record high in January. Prior to the pandemic, imports tended to peak before the holiday shopping season, declining in the first quarter.
“But import growth will slow over the rest of 2022,” said Bill Adams, chief economist at Comerica Bank. “Businesses are making progress in restocking, and real consumer spending on durable goods is expected to fall in 2022. This will mean lower demand for imported consumer products as the year progresses.”
Goods exports rose 1.3% to $158.3 billion in December. In addition to strong growth in services exports, shipments of consumer goods were the highest on record. “The global economy is recovering, as Omicron begins to run out and restrictions are eased,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania. “That’s the good news. The bad news is that the United States continues to ship its recovery to the rest of the world.”
(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)