Plus: U.S. Trade Deficit Expands, China to Dominate World Auto Market, American Advanced Manufacturing Losing Market Share, and Jobless Claims Inch Up.
U.S. Trade Gap Widens Significantly
The United States trade deficit expanded to $48.7 billion in November, a 16 percent increase over the revised $42.1 billion total in November and representing the largest trade gap since April, according to the U.S. Department of Commerce. November exports rose 1 percent to $182.6 billion, while imports climbed 3.8 percent to $231.3 billion.
“Rising imports suggest an improving economy, because it means consumers are willing to spend more on imported goods,” the Wall Street Journal notes. “But economists cautioned that November’s trade figures may have been distorted by Superstorm Sandy, which may have led to higher-than-normal shipments to make up for shipments that were blocked from Northeastern ports or otherwise disrupted after the storm hit in late October.”
The goods deficit for the month grew to $65.7 billion, a $6.6 billion increase from October, while the services surplus remained relatively unchanged at $17 billion. Goods exports climbed $1.6 billion to $129.3 billion, led capital goods and automotive vehicles and parts. Goods imports increased by $8.2 billion to $195 billion, with the largest gains in consumer goods, automotive vehicles and parts, and industrial supplies and materials.
Exports to Europe dropped 1.3 percent in November, reflecting the effects of the debt crisis gripping the region. The politically sensitive trade gap with China inched down to $29 billion from $29.5 billion in October, but is still on track to set a record high for the year.
“Demand for U.S.-made goods in emerging countries may help provide a buffer against any slowdown in Europe’s economy stemming from its debt crisis or slower growth in China,” Bloomberg News reports. “The dollar’s decline through most of 2011 may help maintain demand for American-made equipment. From the end of 2010 through a low on July 26, the dollar fell 5 percent against the currencies of U.S. major trade partners tracked by the Federal Reserve. The drop makes American goods cheaper abroad.”
U.S. Oil Output to Hit 26-Year High
A new analysis from the Energy Information Agency (EIA) predicts that U.S. oil production will jump by 23 percent to a 26-year high by 2014.
According to the EIA, the discovery of large sources of shale gas and the increase in fracking operations to obtain it have already increased U.S. oil production and will continue to do so in the coming years.
In 2012, oil production rose by 780,000 barrels a day to 6.43 million barrels a day; observable trends suggest this number will rise to 7.92 million barrels a day in the coming year, a figure approaching the world’s biggest producer Saudi Arabia’s production level of 10 million barrels a day.
Oil imports will also shrink. The numbers have been falling since 2005 and the EIA forecasts that by 2014 imports will have fallen to 6 million barrels a day, half the total for 2005, the BBC reports.
The increase in output will be matched by a drop in oil prices. The EIA predicts a fall in oil prices from $112 a barrel in 2012 to $99 in 2014.
“Analysts and oil executives have warned that even if the U.S. becomes completely self-sufficient in oil, it will not be able to ignore the potential threat to the world economy created by price rises and supply disruptions, and so would still have an interest in sustaining production in the Middle East,” CNN notes.
China Set to Dominate World Auto Market
Vehicle sales in China exceeded sales in Europe and the U.S. in 2012, and the country will continue to lead world vehicle production over the next four years, according to a newly released auto forecast. The report also reveals that total vehicle output will increase by 23 percent through 2018.
The Wards Auto/Automotive Compass forecast found that China will dominate vehicle sales, with an estimated 26 million units sold by 2016, a 7.5 million unit increase from 2012. During that same period, the U.S., the second leader in auto production, is forecast to see sales increase by 1.3 million units. At current growth rates, the Chinese market could be as large as the European and U.S. markets combined, according to China Daily.
Last year, Chinese passenger vehicle sales increased by 6.8 percent, with 14.68 million units sold. The U.S., which fell behind China’s sales in 2009, was the second largest in the market, with 14.5 million units sold last year.
While the U.S. may be lagging in market sales, China’s auto market growth is a positive sign for U.S. automakers, with General Motors and Ford reporting higher sales growth numbers from last year, Forbes reports.
U.S. Advanced Manufacturing Losing Market Share
Surging imports of advanced manufactured goods are significantly cutting into sales among U.S.-based companies in their home market, slowing down the manufacturing rebound and the American economy as a whole, new research suggests.
According to a recent report from the U.S. Business and Industry Council, imports of foreign-made products took 38.01 percent of the $1.63 trillion U.S. market for advanced manufactured goods in 2010, reaching an all-time high. In addition, while the U.S. economy grew by 4.79 percent in pre-inflation dollars between 2009 and 2010, advanced manufacturing lost 8.66 percent in market share.
If imports in 2010 for the 108 high-value manufacturing industries had remained at 2009 levels, these industries would have generated $138.26 billion more in output and the U.S. economy would have grown by an additional 23.53 percent.
“High and rising import penetration rates for this many critical domestic industries over more than a decade represent powerful evidence of chronic, significant weakness in domestic manufacturing,” the report cautions. “They strongly indicate that advanced U.S.-based manufacturing industries as a whole are failing a basic test of competitiveness – thriving in a market that is not only the world’s largest single market for such goods, but the market that they should know far better than their overseas counterparts.”
Jobless Claims Rise
New initial jobless claims increased slightly in the latest week reported, but the level of claims in recent months remains little changed and is consistent with gradual improvement in the U.S. labor market. According to the U.S. Department of Labor, unemployment claims for the week ending January 5 rose by 4,000 to a total of 371,000.
Moreover, the four-week moving average, which smoothes out volatility and provides a clearer long-term picture of the job market, climbed by 6,750 to a total of 365,750.
“Claims usually zig-zag in December and early January because of the holiday season; economists often discount the data until the end of the month. Yet there’s been little change in the overall level of claims since last summer, echoing other employment data,” MarketWatch notes. “Looking ahead, economists don’t expect a big pickup in hiring. Democrats and Republicans are headed toward another showdown in February, this time over the U.S. debt ceiling, and sharp cuts in defense and domestic spending could also kick in unless Washington lawmakers alter current law.”
The number of people who continue to receive jobless benefits fell by 127,000 down to 3.11 million, the steepest drop since January 2011. U.S. job creation has remained quite steady over the past two years, with the economy adding an average of 153,000 net jobs a month since the start of 2011.