Cheaper oil helps shrink U.S. trade deficit
Plunging global oil prices are having another positive effect on the U.S. economy by shrinking the nation's international trade deficit.
New data released today by the U.S. Commerce Department shows that the trade gap -- the difference between how much the country imports and it exports -- fell to $39 billion in November. That was down 7.7 percent from October and the second straight month that the tbalance of trade has declined.
The shrinking deficit stems chiefly from falling crude prices and rising U.S. oil production, which has caused petroleum imports to fall to their lowest level in more than five years. A widening deficit can hurt job-creation as consumers spend more on foreign-made goods than U.S. companies are exporting abroad.
The trade gap with China -- the largest U.S. trading partner -- rose $200 million in November to $29.8 billion. Imports from the world's most populous nation still top U.S. exports, which have been held back by the rising value of the dollar. A strong greenback makes U.S. goods pricier in foreign markets, while making overseas goods more affordable for American consumers.
The U.S. deficit with the European Union also rose in November. For American companies, the data is a mixed blessing because a strong dollar can cost them sales against rivals in countries with weaker currencies. That doesn't appear to a significant issue yet given that third quarter GDP was 5 percent, its biggest gain in 11 years.
"In the constant-dollar world, continuing weakness in exports will be an ongoing battle as companies selling overseas face a strong dollar and weak markets in which to sell," IHS Global Insight economists Global Patrick Newport and Michael Montgomery said in the note to clients.
Economists remain optimistic that the recent pickup in U.S. growth will continue in 2015. BMO Capital Markets senior economist Jennifer Lee expects gross domestic product to rise to 3 percent this year from 2.4 percent in 2014. The unemployment rate was at 5.8 percent in November, a six-year low. Data released today by ADP indicates that the job market continues to be resilient, adding 241,000 jobs in December, after a 227,000 gain in November. The jobless rate peaked at 10 percent in 2009.