US: Trade deficit narrows as exports pick up - Wells Fargo

Analysts from Wells Fargo, explained that the decline in US trade deficit was largely attributable to a big increase in goods exports, particularly aircraft. They affirmed that as US growth picks up, net exports will likely weigh on overall GDP in the years ahead.

Key Quotes: 

“The U.S. economy increased imports by about $3.5 billion in December, but exports grew even faster, increasing just over $5 billion. The net result was a bigger-than-expected narrowing in the trade deficit for the final month of 2016.”

“On the export side of things, goods are a bigger piece of the action than services, but it is not as lopsided as it is on the imports side. Goods exports are almost precisely twice the size of service exports and with service exports only incrementally higher in December, most of the action in exports was on the goods side as well.”

“The industries that contributed most to the surge in exports in December were capital goods and industrial supplies. Drilling into the sub-categories, we find that aircraft was a big factor in December. Civilian aircraft exports increased over $1 billion and engines for those planes added another $978 million.”

“The energy sector was not terribly impactful this month. Crude oil exports dropped off about $200 million in December, but the decline here was more than offset by $241 million dollar increase in liquid natural gas.”