Consumer Demand for Goods Drove U.S. Import Surge During Holidays

Date: Friday, January 7, 2022
Source: The Wall Street Journal

U.S. consumer demand for goods and an easing of supply-chain constraints drove a surge in imports in November, pushing the trade deficit close to a record.

The goods deficit increased in November to a record $99 billion as Americans shopped for clothing, toys, and cell phones early in the holiday season, the Commerce Department said on Thursday.

Demand for imports outstripped U.S. exports by a large amount, leading the U.S. trade deficit in goods and services in November to widen to $80.2 billion.

American manufacturers sent fewer goods overseas in November compared with the prior month, but spending by tourists as U.S. borders loosened Covid-19 restrictions for international travelers boosted services exports. That meant that the U.S. recorded a 0.2% increase in exports for the month overall.

“The trade deficit will likely stay high in December and January due to the backlog of ships waiting to unload at U.S. ports and headwinds to tourism from Omicron,” PNC Financial Services Group economist Bill Adams said in a note.

Backlogs at U.S. ports showed signs of easing in the fall, helping boost imports, while consumer spending was solid early in the holiday shopping season.

“It’s the ongoing strength of U.S. retail spending that’s one of the big drivers of this,” said Andrew Hunter, senior U.S. economist at Capital Economics Ltd., referring to strong demand for consumer goods manufactured overseas.

Easing Covid-19 restrictions ahead of the surge from the Omicron variant and rebounding demand overseas also have started to benefit U.S. exports, particularly of energy and agricultural commodities.

After collapsing during the pandemic, global trade has roared back, pushing the U.S. trade deficit to record levels as the pandemic continues. High demand coupled with transportation and delivery challenges, such as shortages of port and warehouse workers, have crimped goods trade in recent months. But signs are mounting that supply-chain disruptions are beginning to dissipate.

A supply-chain barometer to gauge disruptions by the Federal Reserve Bank of New York found that global-supply pressures, while still high, have peaked and are expected to moderate somewhat going forward.

The Institute for Supply Management this week in its December manufacturing report said that “supply-chain performance is moving toward a more appropriate balance with demand.”

Factories in Europe and the U.S. also reported a further easing of supply-chain woes and related cost increases as 2021 drew to a close, although the spread of Omicron world-wide threatens to worsen shortages of labor and supplies.

Still, congestion at U.S. ports along with supply chains snarled by the Covid-19 pandemic remain wild cards for businesses and consumers, economists say, with trade expected to continue to be a challenge for businesses in the months ahead.

“Input-cost inflation is at a 10-year high and labor shortages and other issues are causing disruptions across our supply chain, from our suppliers to manufacturing to distribution,” General Mills Inc. Chief Executive Jeff Harmening said during a Dec. 21 earnings call. “These disruptions are driving down service levels and driving up costs above and beyond inflation throughout the industry,” Mr. Harmening added.

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