Day: December 29, 2021

The U.S. trade deficit in goods mushroomed to the widest ever in November as imports of consumer goods shot to a record ahead of the second straight COVID-19-distorted holiday shopping season along with industrial supplies, while exports slipped after a historic gain a month earlier.

The goods trade gap reported Wednesday by the Commerce Department is likely to remain historically high as long as the coronavirus pandemic continues, economists said. The emergence of the fast-spreading omicron variant of COVID-19 that has driven U.S. and global caseloads to a record this week may exacerbate it further in the near term if it limits American consumers’ spending on services and restokes demand for imported goods.

Omicron also stands as a downside risk in the housing market. A reading of pending home sales also out Wednesday showed an unexpected drop in November, and while that data largely predated omicron’s ascendance in the United States, the highly contagious new variant could further limit home sales in the near term, the National Association of Realtors (NAR) said.

The goods trade deficit widened last month by 17.5% to $97.8 billion from $83.2 billion in October, Census Bureau data showed. That exceeds the previous record deficit set in September of $97 billion and may damp optimism that trade might finally add to U.S. economic growth this quarter for the first time in more than a year.

Imports rose by 4.7% with industrial supplies leading the way with an increase of $5.7 billion to $63.2 billion, followed by consumer goods rising by $2.9 billion to just shy of $67 billion as retailers rushed to fill store shelves ahead of Christmas. Both were record highs.

“The emergence of the omicron variant may further ignite demand for imported goods if services activity is restricted” in the first quarter of 2022, Nancy Vanden Houten, lead economist at Oxford Economics, wrote after Wednesday’s report.

Goods exports, meanwhile, declined 2.1%, with weakness across the board outside of a 4.3% increase in food exports. The drop was led by declines of $1.4 billion in industrial supplies and $1.3 billion in capital goods.

The worldwide surge of coronoavirus cases to a record in recent days – including a record U.S. caseload – may weigh on global demand in the months ahead, risking an even wider trade gap, Vanden Houten said.

The so-called Advance Indicators report also showed wholesale inventories climbed 1.2% last month, while retail inventories increased 2.0%. Retail inventories, excluding autos, which go into the calculation of gross domestic product, edged up by 1.3% to $465.2 billion, the latest in a string of record-high readings.

The economy grew at a 2.3% annualized rate in the third quarter, a step-down from earlier in the year, but activity has rebounded in the fourth quarter with a consensus among economists building around a growth rate of 6% to 7% in the final three months of 2021.

Trade has been a drag on gross domestic product growth for five straight quarters, while inventories added to output in the third quarter.

Earlier this month, the Commerce Department reported a sharp reduction in the overall trade deficit – including services – for October, which had generated some optimism that trade may contribute to the improvement in output in the final quarter of the year. The big reversal to a record goods trade gap in November may prompt a rethinking of that.

Economists at Action Economics have dialed back their fourth-quarter GDP growth estimate to 6.5% from 7.0%, with exports now seen subtracting from growth rather than adding to it as had been previously expected. Economists at JPMorgan and Goldman Sachs, meanwhile, left their estimates intact at 7%.

Meanwhile, contracts to buy U.S. previously owned homes fell unexpectedly in November as limited housing stock and lofty prices crimped activity, and the explosion of new coronavirus cases poses a risk to the housing market headed into 2022.

NAR said its Pending Home Sales Index, based on signed contracts, fell 2.2% last month to 122.4. Pending home sales were lower in all four regions.

Economists polled by Reuters had forecast contracts, which typically become final sales after a month or two, would rise 0.5% in November.

“There was less pending home sales action this time around, which I would ascribe to low housing supply, but also to buyers being hesitant about home prices,” said Lawrence Yun, NAR’s chief economist.

Looking ahead, Yun said Omicron poses a risk to the housing market’s performance, as buyers and sellers are sidelined, and home construction is delayed.

Source: Voice of America

The World Health Organization is warning that the rapid circulation of the omicron and delta variants of the coronavirus is leading to a tsunami of cases, severe disease and surging deaths among the unvaccinated.

WHO Director-General Tedros Adhanom Ghebreyesus said Wednesday that while science had led to the development of COVID-19 vaccines, the global death toll from the disease has kept rising.

In 2020, the World Health Organization reported 1.8 million deaths globally, a number that pales in comparison to the additional 3.5 million deaths reported in 2021.

Tedros said the reason for the climb was that politics has too often trumped the need to work together to defeat this pandemic.

“Populism, narrow nationalism and hoarding of health tools, including masks, therapeutics, diagnostics and vaccines, by a small number of countries undermined equity and created the ideal conditions for the emergence of new variants,” he said.

Tedros condemned the misinformation and disinformation that often has been spread by a small number of people for undermining science and trust in lifesaving health tools. He said these twin evils have driven vaccine hesitancy and are to blame for the disproportionately large number of unvaccinated people dying from the delta and omicron strains of the coronavirus.

He warned that the virus that causes COVID-19 would continue to evolve and threaten the health system if nations did not improve their collective response. He said it was time to rise above short-term nationalism and protect populations and economies against future variants by addressing global vaccine inequity.

“Ending health inequity remains the key to ending the pandemic,” Tedros said. “As this pandemic drags on, it is possible that new variants could evade our countermeasures and become fully resistant to current vaccines or past infection, necessitating vaccine adaptations.”

The WHO chief said it was time to banish the politics of populism and self-interests that have been derailing the global response to the pandemic. He asked everyone to make a New Year’s resolution to get behind WHO’s campaign to vaccinate 70 percent of the world’s population by the middle of 2022.

Source: Voice of America