Data from government sources showed that the U.S. trade gaps widened to record levels in 2022. It was a result of strong imports, and high spending by Americans for goods manufactured outside the U.S.
Commerce Department data shows that between 2021-2021, the global trade gap increased $103.0 trillion to $948.1 million last year. This is due to an increase of imports for goods, which include crude oil and consumer items such as pharmaceuticals.
According to data from the government, this is the largest deficit since 1960.
Analysts point out that trade was a key factor in GDP growth during the past year. This dragged it down in 2022’s early months, but gave it an increase later.
According to the Commerce Department, December’s trade deficit grew from $6.4 billion up to $67.4 trillion.
US imports increased $4.2 billion between November and December. They reached $317.6 million due to higher consumer spending such as mobile phones, household items, as well as automobiles.
Decline in exports from December was $2.2 billion to $252.2 billion. This is due to a drop in the exports of industrial supplies and other materials.
According to the latest statistics, households are shifting more of their spending toward services than they do on goods. Consumers have been struggling with rising inflation.
In 2022, the goods trade deficit with China increased by $29.4 trillion to $382.9 million. This is also an unprecedented figure.
The United States has imported more products from the European Union in the last year than China since 2019.
But analysts have noted that the numbers are affected by Beijing’s strict virus controls and coronavirus outbreaks, which hit its economy last year, and an uptick in commercial activity elsewhere as countries bounced back from the pandemic.
Reduction in demand
“Net trade has been a significant swing factor in headline GDP growth over the past year,”Ian Shepherdson is the chief economist of Pantheon Macroeconomics. He made this comment in a recent letter.
“It depressed growth in the first quarter of 2022 as an inventory-rebuilding frenzy by wholesalers and retailers led to a surge in imports,”He said.
As the surge ended, trade was able to provide a lift in the quarters that followed. But he noted that 2023 would see similar large swings. “are unlikely.”
Matthew Martin, Oxford Economics said that the economy experienced solid growth during the fourth quarter.
But “underlying data points to softening activity, particularly for the world’s major trade routes which have seen reduced demand from retailers and consumers,”He warned.
He also stated that December saw a decline in imports and exports for industrial supplies and material, which confirmed the fact that the sector of manufacturing was weakening towards the end of last year.
Rubeela Faooqi is the chief US economist for High Frequency Economy. She stated that trade flow has been a major factor in economic growth. “slowed recently on a shift in demand for services from goods and weaker global growth.”
“But better growth prospects in the US and abroad could provide support over coming months,”Sie said.
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