Higher interest rates impact trade as imports and exports take an unexpected downturn, signaling potential shifts in the economic landscape.
The U.S. trade deficit narrowed unexpectedly in November as both imports and exports decreased, indicating the influence of higher interest rates on the nation’s economic situation, as per a report released by the Commerce Department on Tuesday.
Contrary to analysts’ predictions of a slight widening of the trade deficit, the gap decreased to $63.2 billion, down from the revised October figure of $64.5 billion. The unforeseen strength in U.S. consumption has assisted trade, but the impending impact of higher interest rates, which tends to dampen demand, has added pressure on imports.
In November, U.S. exports saw a decrease of $4.8 billion, totaling $253.7 billion, while imports had a steeper drop of $6.1 billion, reaching $316.9 billion. The decline in exports was attributed to a $3.6 billion fall in goods, such as industrial supplies and materials like 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 saw a decline, particularly in consumer goods like cell phones and pharmaceutical preparations. The U.S. goods deficit with China narrowed by $2.4 billion to $21.5 billion in November, according to the Commerce Department.
Rubeela Farooqi, Chief U.S. Economist at High Frequency Economics, noted 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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