US goods trade deficit deteriorates; factory orders edge up

WASHINGTON — The US goods trade deficit widened sharply in December as slowing global demand and a strong dollar weighed on exports, another sign that economic growth slowed in the fourth quarter.

Other data from the Commerce department on Wednesday showed new orders for US-made goods barely rose in December and business spending on equipment was much weaker than previously thought, pointing to a softening in manufacturing activity.

The reports, which added to weak December data on retail sales and housing starts, could prompt economists to cut fourth-quarter gross domestic product (GDP) estimates. But some of the drag on growth from the goods trade gap and weak business spending on equipment could be offset by a strong increase in inventories in December.

The goods trade deficit jumped 12.8% to $79.5 billion in December, boosted also by an increase in imports. Exports fell 2.8% amid steep declines in shipments of foods, industrial supplies and capital goods. Imports increased 2.4% driven by food and capital and consumer goods.

Retail inventories increased 0.9% in December after falling 0.4% in the prior month. Retail inventories, excluding motor vehicles and parts, the component that goes into the calculation of gross domestic product, rebounded 1% in December after dropping 0.9% in November.

Growth estimates for the fourth quarter are currently around a 2% annualized rate. The government will publish the fourth-quarter GDP report on Thursday. The economy grew at a 3.4% pace in the third quarter.

US stocks added to losses after US Trade Representative Robert Lighthizer said US issues with China are “too serious” to be resolved by promises of more purchases of US goods by Beijing. Prices of US Treasuries modestly pared losses, while the dollar added to gains against the yen and euro.

FACTORY ACTIVITY SLOWING In another report on Wednesday, the Commerce department said factory goods orders edged up 0.1% in December amid declining demand for machinery and electrical equipment, appliances and components.

Data for November was revised slightly up to show factory orders falling 0.5% instead of the previously reported 0.6% drop. Economists polled by Reuters had forecast factory orders rising 0.5% in December.

Manufacturing, which accounts for about 12% of the economy, is slowing as some of the boost to capital spending from last year’s $1.5-trillion tax cut package fades. In addition, the strong dollar and cooling growth in Europe and China are hurting exports. Lower oil prices are also slowing purchases of equipment for oil and gas well drilling.

In December, orders for machinery dropped 1% after tumbling 2% in November. Orders for mining, oil field and gas field machinery plunged 5.2% after rising 1.9% in November. There were also decreases in orders for industrial machinery as well as turbines, generators and other power transmission equipment in December.

Orders for electrical equipment, appliances and components fell 0.3% after dropping 2.6% in November. Orders for transportation equipment rose 3.2% in December after increasing 3.1% in the prior month.

Orders for civilian aircraft and parts jumped 28.4% in December. Motor vehicles and parts orders rose 2.4%.

The Commerce department also said December orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans on equipment, fell 1% instead of the 0.7% drop reported last week.

Orders for these so-called core capital goods declined 1.1% in November. Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, were unchanged in December instead of the previously reported 0.5% increase.

Core capital goods shipments fell 0.2% in November. —