US economy’s growth in Q4 seen stronger on export gains Canada trade deficit halved in December

WASHINGTON, Feb 8, (Agencies):  The US trade deficit narrowed sharply in December because exports rose while oil imports plummeted. The smaller trade gap means the economy almost surely grew in the October-December quarter — an improvement from the government’s estimate last week that it shrank in the final months of 2012. The trade deficit fell nearly 21 percent in December from November to $38.6 billion, the Commerce Department said Friday. That’s the smallest in nearly three years. Exports rose 2.1 percent to $186.4 billion. Exports of oil and other petroleum products rose to the highest level on record. Overseas shipments of agriculture goods and aircraft also increased. Imports shrank 2.7 percent to $224.9 billion. Oil imports plunged to 223 billion barrels, the fewest since February 1997. “All this is encouraging and ... it now looks like exports will continue to strengthen as the year goes on,” said Paul Ashworth, an economist at Capital Economics. A survey of US manufacturers, released last week, showed that export orders grew in January for the second straight month.

A narrower trade gap boosts growth because it means US companies earned more from overseas sales while consumers and businesses spent less on foreign products. Fewer exports were one of the reasons the government’s first estimate of economic growth in the October-December quarter showed a contraction at an annual rate of 0.1 percent. The December trade deficit figures were not available when the government reported its estimate last week. Jim O’Sullivan, chief US economist at High Frequency Economics, estimates the improved trade picture will add 0.7 percentage point to economic growth in the October-December quarter. That would show growth at an annual rate of 0.6 percent. The government will issue its second estimate for fourth-quarter growth on Feb 28. Sluggish restocking by companies and deep cuts in defense spending are expected to keep growth at the end of last year weak.
The trade deficit also narrowed for all of last year, shrinking 3.5 percent to $540.4 billion. Many economists believe that trade will give the economy a small lift in 2013. That forecast is based on an assumption that the European debt crisis will stabilize, helping boost US exports to that region, and economic growth in Asia will continue to rebound.

Canada’s trade deficit was halved to Can$901 million (US$898 million) in December, as a big drop in imports outweighed the impact of fewer exports, a government agency said Friday. The ninth consecutive monthly deficit was down from a revised Can$1.7 billion (US$1.7 billion) in the previous month, according to Statistics Canada. The agency noted a decline in imports of lubricants and other petroleum refinery products, as well as lead and zinc ores and concentrates, while crude oil and bitumen imports rose. Logging, mining and construction machinery imports fell 18.9 percent in December, continuing a steady decline from a record high in June. Shipments of vehicle engines and motor vehicle parts also fell as plant shutdowns over the Christmas holiday season plant were longer than in previous years.

Overall imports fell to Can$38.5 billion (US$38.4 billion) in December. Exports of crude oil and bitumen, natural gas, and coal fell for the first time in months. Passenger car and light truck exports fell too. Exports of copper ores and concentrates, as well as potash, and unwrought precious metals and precious metal allows, meanwhile, were up. Total exports declined to Can$37.6 billion (US$37.5 billion) on lower volumes, despite higher prices. Canada’s trade surplus with the United States, its largest trading partner, narrowed from Can$3.8 billion (US$3.8 billion) to Can$3.5 billion (US$3.5 billion). Both imports and exports decreased.

Canada shed 22,000 jobs last month, but a decline in the number of job hunters pushed the unemployment rate down 0.1 percentage points to 7.0 percent, the government statistics agency said Friday. Fewer people were working in educational services and manufacturing in the month, while employment rose in construction and public administration, according to Statistics Canada. The public sector shed 27,000 jobs while self-employment was up slightly, it said. There was little change in the number of private sector jobs.

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