United State Trade Deficit Widened in December

The U.S. trade shortage was $40.6 billion in December 2010, which was
smaller than market expectations for a -$42.5 billion shortfall.
November's shortage was unrevised at -$38.3 billion. The wider trade
shortage reflected a $2.8 billion (1.8%) rise in exports paired with a
$5.09 billion (2.6%) increase in imports. On a volumes basis, the
goods shortage deteriorated mildly to -$46.0 billion from -$45.2
billion in November.

Exports of industrial supplies and materials, capital goods and auto
products rose in December. Exports of consumer goods weakened in the
month. Import growth was broadly based with industrial supplies and
materials and capital goods making the largest contributions. Imports
of petroleum products rose by $3.0 billion or 14.9%. On a volumes
basis, exports rose 2.1% in December while imports rallied by 2.0%.

In 2010, exports grew by 16.6% while import growth totalled 19.7%. The
2010 trade gap totalled $498 billion, which was up from $374 billion
in 2009. In volume terms, real exports rose by 14.7% in 2010 with
imports rising by 14.5%, and the real goods trade shortage widened by
$68 billion.

Even though the real goods trade shortage increased in December, it
only moderated the narrowing that occurred in the fourth quarter of
2010. As a result, net trade provided support to overall GDP growth
after acting as a drag in four of the previous five quarters. Real
goods imports fell in the final quarter of 2010 thereby marking the
first dip in a year and a half while exports continued to rise.
Today's data are in line with the advanced real GDP report for the
fourth quarter of 2010, which showed that net exports added a hefty
3.4 percentage points to the economy's output. For the year as a
whole, but, net exports subtracted 0.5 percentage points from the 2.9%
annual growth rate.

The swing in the trade component, from weighing on the pace of
expansion to acting as a support for GDP, is unlikely to be sustained
in 2011, but. Evidence that U.S. household and business demand is
heating up is consistent with imports growing more rapidly than
exports; but, the drag from net exports is expected to be less than in
2010 and, combined with firming domestic demand, sets the U.S. economy
up to grow at a stronger 3.4% pace for 2011 and 3.6% for 2012. While
this is undoubtedly excellent news for the Centralized Reserve, even
with this strengthening, it will take considerable time for the U.S.
output gap to close, meaning that price pressures will remain muted
and the unemployment rate elevated. Against this backdrop, the Fed is
unlikely to make any changes to monetary policy in the near term.
Although the U.S. economy has turned onto a firmer growth path, until
more substantive progress has been made toward humanizing labour
market conditions, the centralized funds rate will stay at 0% to
0.25%.

Source: ActionForex.Com