The trade deficit narrowed more than forecast in November as U.S. petroleum imports sank to the lowest level in more than five years.
The gap shrank 7.7 percent to $39 billion, the smallest since December 2013, from October’s $42.2 billion, Commerce Department figures showed today in Washington. The median forecast in a Bloomberg survey of 69 economists projected $42 billion. The smallest quantity ofcrude oil imports in more than two decades and the lowest prices in four years combined to limit the value of foreign-fuel purchases.
A combination of rising supply as domestic production picks up and slower growth overseas that’s reducing demand is leading to a rout in oil prices that has continued into 2015. Outside of fuel, Americans bought record amounts of consumer goods that shows the world’s largest economy is strengthening.
The drop in oil prices is “going to put some downward pressure on the trade deficit in the near term,” said Gus Faucher, an economist at PNC Financial Services Group Inc. in Pittsburgh, who projected a smaller trade gap. “Once oil prices stabilize, I think we’ll see the trade deficit expand a bit.”
Companies added more workers than forecast in December, indicating the job market was sustaining strength as 2014 drew to a close, another report showed today. Employment increased by 241,000 after a 227,000 gain in November, according to figures from Roseland, New Jersey-based ADP Research Institute.
Stock-index futures rose, signaling equities may halt their worst start to a year since 2008, on the gain in employment and the narrowing of the trade gap. The contract on the Standard & Poor’s 500 Index maturing in March climbed 0.8 percent to 2,009.7 at 8:49 a.m. in New York.
Bloomberg survey estimates for the trade balance, or the difference between the value of imported goods and services and U.S. exports, ranged from deficits of $39 billion to $43.9 billion. The Commerce Department initially reported a $43.4 billion shortfall for October.
The deficit last year narrowed 11.4 percent to $476.4 billion, the smallest since 2009. Leading up to the last recession, the shortfall reached a record $761.7 billion in 2006.
Imports dropped 2.2 percent, the most since June 2013, to $235.4 billion from $240.6 billion in the prior month.
The U.S. imported $23.1 billion worth of petroleum in November, the least since August 2009. The 189 million barrels of foreign crude oil purchased during the month were the fewest since February 1994, and the $82.95 average price per barrel was the lowest since December 2010.
Excluding petroleum, the trade gap would have been little changed in November at $27.6 billion compared with $27 billion the prior month.
Slower foreign demand is also holding back orders for U.S. products. Exports declined 1 percent to $196.4 billion from $198.3 billion in October.
After eliminating the influence of prices, which generates the numbers used to calculate gross domestic product, the trade deficit narrowed to $47.8 billion compared with $50.1 billion in October. The average so far in the fourth quarter is little changed from the previous three months, indicating trade won’t have much impact on GDP.
A narrowing of the trade deficit in the three months ended in September added 0.8 percentage point to growth, the category’s biggest contribution in three quarters, according to Commerce Department figures.
GDP advanced at a 5 percent annual rate in the third quarter, the strongest gain in 11 years and up from a previously estimated 3.9 percent pace.
Similar contributions to GDP will be difficult to match in subsequent quarters as faster growth in the U.S. and slower demand among trading partners boosts imports and slows exports.
At the same time, companies including Dearborn, Michigan-based Ford Motor Co. are betting a slowing in exports amid waning global demand won’t spoil a U.S. trend of 3 percent growth or better this year.
“While the strong dollar does have the potential to put some damper on that, I don’t think it’s going to be a significant factor in terms of offsetting the other positive forces that are supporting overall economic growth this year,” Chief Economist Emily Kolinski Morris said on a Jan. 5 conference call, citing cheaper fuel and job gains among the factors boosting demand.
Lower prices at the pump have been cushioning consumers’ balance sheets since September. The average cost of a gallon of regular gasoline was $2.19 as of Jan. 5, marking 103 consecutive decreases and the cheapest rate since May 2009, according to data from motoring group AAA.
Monthly employment gains are on pace to show their best performance in 2014 in 15 years, further propelling U.S. growth. An average 240,910 jobs were added each month last year through November. December figures from the Labor Department are scheduled for release Jan. 9.