And so after that epic 5.0% Q3 GDP print, driven largely by Obamacare, the payback begins, and the annualized Q4 GDP print, which came in at nearly half the previous quarter run rate, or 2.6%, is about to tumble by another ~0.5% following the just released trade data for December which saw a 17.1% surge in the US trade deficit from $39 billion (revised to $39.8 billion) to a whopping $46.6 billion in December, the widest deficit since 2012, as US exports declined 0.8% to 4194.9Bn from $196.4 Bn, while imports rose notably from $236.2Bn to $241.4Bn in the month before. All of this brought to you courtesy of the soaring USD. This was also the biggest miss to expectations of $38.0 billion since July of 2008. If this does not force policymakers to reassess the impact of the soaring dollar on US trade, nothing will.
Finally, if and when the US shale boom ends, and the US is forced to once again import the bulk of its oil needs from abroad, watch as the US deficit surges in the coming months and years, which incidentally is precisely what the Fed needs: after all in order for the Fed to monetize US debt, the US needs to issue debt to fund its deficit, which now has no choice but to go far wider from recent levels in order to restock the available stock of US Treasurys.
The trade deficit broken down by key trading partners:
- China: deficit of $28.30 billion, down from $29.94 billion as the USD peg is also impairing Chinese exports.
- EU: deficit of $15.1 billion, a surge from $11.8 billion thanks to the plunging EUR
- Japan: deficit of $5.7 billion, in line with November's $5.52 billion
For those curious about the petroleum trade, US petroleum imports rose to 313.3m barrels in December, at a value of $23.2 billion. Crude oil imports increased to $18.2b from $15.7b last month, representing 78.4% of total petroleum imports. December non-crude petroleum imports widened to $5b from $4.3b m/m; 21.6% of total petroleum imports.
And something curious: US crude oil imports averaged 7.980m b/d in Dec. compared to 6.296m b/d in Nov., a substantial jump and one which would have been the result of a drop in domestic production, if indeed domestic production were dropping instead of rising. So the increase is confusing on the surface.
The breakdown of imports:
- Oil imports from OPEC rose to 38.2% of the total
- Oil imported from Canada and Mexico was 51.9% of total in Dec. vs 52.0% in Nov.
Bottom line: expect the sellside crew to unleash a barrage of downward Q4 GDP revisions any second.