On Friday, the Census Bureau told us that the U.S. trade deficit swelled to $52.6 billion in January, from $48.8 billion in December. Economists were looking for the deficit to widen to $49.0 billion.
Jim O’Neill, Chairman of Goldman Sachs Asset Management, notes that while the figure could be bad news for GDP in the short-run, structural changes in the economy continue to favour this metric shrinking in the long-run.
From his latest Viewpoints:
One piece of not quite so good news yesterday was that of the US trade balance deteriorating above $50 bn in January, the worst for quite sometime, driven by a notable rise in imports. As the GS Economics Group points out, coming so early in the quarter, this implies a negative external contribution to GDP for the quarter unless there is a big improvement in the next 2 months. Many structural bears will pounce on this release and suggest that, big picture, nothing has really changed, and as any domestic recovery continues, in line with it so will the weak US personal savings rate and its persistent external deficit. The only problem with this argument is that it isn’t really supported by much else. The whole story of the domestic US energy supply story suggests that, at least for the oil trade balance, there is a major fundamental change just starting. In addition, as I repeatedly have discussed in recent weeks, there are lots of growing anecdotes of US and other multinationals talking about moving production back to the US from overseas, so I am dubious about renewed trend deterioration.