Following November's massive trade deficit surge, when the final print of $48.7 billion was far worse than the $41.3 billion expected, it was only (il)logical that the December trade number would reverse this trend to the other extreme, which it did with the December trade balance plunging from a revised $48.6 billion to a tiny $38.5 billion - the lowest deficit since January 2010, and the biggest beat to expectations of $46 billion since February 2009.
The deficit was the result of December exports which were $3.9 billion more than the $182.5 billion in November, and imports some $6.2 billion less than November's total $231.1 billion. Broken down by category, the goods deficit decreased $9.4 billion from November to $56.2 billion, and the services surplus increased $0.7 billion from November to $17.7 billion. A key driver of this move was a spike in Petroleum exports which shrunk the Petroleum product trade gap to the smallest it has been since August 2009 as the US imported the least amount of crude oil since February 1997. Whether this is due to rising domestic production, or just the ongoing collapse in end demand (which is to the US economy as electricity is China's traditional "8%" GDP) remains unclear.
The immediate result of this second consecutive data outlier in a world which as we showed yesterday trade is imploding thus putting all trade data in a very questionable light, is that Q4 GDP will now have to be revised higher due to the bean counters plug of net export data into their GDP calculation. It also means that much of the expected boost to Q1 GDP exports will actually have taken place in December, in turn pushing Q1 GDP forecasts marginally lower.
Specifically, The November to December increase in exports of goods reflected increases in industrial supplies and materials ($3.8 billion); other goods ($0.3 billion); and foods, feeds, and beverages ($0.1 billion). Decreases occurred in capital goods ($0.4 billion); automotive vehicles, parts, and engines ($0.3 billion); and consumer goods ($0.2 billion). The November to December decrease in imports of goods reflected decreases in industrial supplies and materials ($4.2 billion); automotive vehicles, parts, and engines ($0.9 billion); other goods ($0.6 billion); capital goods ($0.3 billion); and foods, feeds, and beverages ($0.1 billion). Consumer goods were virtually unchanged.
Finally, we leave it up to readers to figure out how China can report a December trade surplus with the US of $18.7 billion, while the US just reported a Chinese trade deficit of $24.5 billion.