U.S. trade deficit narrows as oil imports fall to 20-year low
While Canada’s trade deficit widened on falling oil exports in November, the U.S. trade deficit shrank to the lowest level in a year as it bought less foreign oil.
The U.S. merchandise trade deficit was $39 billion US, down 7.7 per cent from the October deficit of $42.2 billion.
The rising U.S. dollar is eating into export opportunities and exports fell one per cent to $196.4 billion.
But imports fell more quickly, down 2.2 per cent to $234.4 as the U.S. imported less crude and paid lower prices for it.
A boom in shale oil production has boosted crude output in the U.S. to the highest level in 40 years.
As a result, the volume of oil imported in November was at its lowest level since 1994. The average price was at $82.95 a barrel, still well above what Americans will pay as the current lower prices around $50 a barrel kick in.
At the same, the U.S. is exporting more energy. For the first 11 months of 2014, U.S. energy exports are up 9.6 per cent from 2013.
Lower oil prices could eventually slow production of domestic oil, but in the meantime they’re stimulating the rest of the U.S. economy, encouraging consumer spending and lowering prices for transportation and manufacturing.
That could mean the trade gap will continue to narrow over the next six months.
"The trade gap will continue to shrink apace until the oil import tab stops falling like a rock," said Patrick Newport, an economist at Global Insight.
Canada’s exports of crude to the U.S. fell 3.4 per cent by volume and prices were down 6.7 per cent, according to Statistics Canada figures released today. That led to a 2.6 per cent decrease in Canada’s exports to the U.S. to $32.9 billion in November and contributed to a widening Canada’s merchandise trade deficit. America’s deficit with China, which provides cheap manufactured goods, dropped eight per cent to $29.9 billion in November but remained on track to set a new all-time high for the year.
The U.S. deficit with the European Union fell by 7.4 per cent to $11.8 billion. The economic slowdown in Europe is dampening U.S. export sales, but imports to the U.S. from the EU fell more steeply.