Today brings the Commerce Department's December trade report. The short story, from Reuters:
The U.S. trade deficit narrowed in December as oil import prices had the biggest decline in nearly 14 years, while first-time claims for jobless benefits fell to the lowest level in more than 4 years.
However, the annual trade gap still widened more than 24 percent in 2004 to a record $617.7 billion, the Commerce Department said on Thursday.
The December trade gap totaled $56.4 billion, only slightly below the average estimate of Wall Street analysts surveyed before the report...
As noted earlier, a revision in the trade figures with Canada is going to have some impact on our number for 4th quarter GDP growth.
Commerce revised its estimate of the November trade gap to $59.3 billion, down from $60.3 billion, partly because of a computer error by Canada's statistical agency, which understated U.S. exports to Canada in November by $1.4 billion, the Commerce Department said.
...the trade numbers "are better than what the Commerce Department assumed when they put together the advance estimate for (fourth-quarter) GDP growth, so that is going to get revised up, probably to around 3.8 (percent) from the 3.1 that was the advance estimate," said Dana Johnson, chief economist with Comerica in Detroit.
No discussion of trade is complete, of course, without some mention of China.
More than 25 percent of the annual trade deficit reflects the shortfall in trade with China, which hit a record $162 billion in 2004, up from last year's record $124 billion.
But don't forget this:
Despite the huge gap, China is one of the fastest growing markets for U.S. exporters,
or that the deficit is not just, or even mostly, a Chinese thing.
The bilateral trade deficits with Canada, Mexico and the European Union also set records in 2004.
Two months do not a trend make, but the November and December figures are at least somewhat encouraging for the soft landing school (which includes this guy). But if you want the negative take, Bloomberg is here to help.
The dollar fell almost a cent against the euro and erased gains against the yen on speculation the U.S. will struggle to further narrow its trade deficit...
"The optimism we have seen in the dollar since the start of the year is starting to fade,'' said [Ian] Stannard [a currency strategist in London at BNP Paribas SA]. "It's not a very significant improvement in the deficit and it's not going to disappear quickly.''
And this, from FXSTREET.com:
Immediately after the release the dollar rallied, but the gains soon dried up and the currency fell back well below intraday lows, with the euro beginning to inch back towards the 1.29 usd mark
"The initial reaction was to buy dollars after the data, but if you read between the lines it is still a huge number and 2004 was still a record year," said Informa Global Markets analyst Gary Noone...
Paul Ashworth, international economist at Capital Economics noted that around two-thirds of the deficit reduction was due solely to a fall in crude oil prices
"When imports are already a third bigger in value than exports that makes for a particularly uncomfortable outlook. It suggests that the dollar still has a lot further to fall despite its recent rally," he said.
OK, then. We'll put a hold on the victory parade.