A Record Deficit – The U.S. Looks Back on Trade During 2022
With millions praising the labor market on its massive win in January, there are other signs that seem to paint a mixed economic picture. On the commercial front, the United States’ imports exceeded its exports throughout 2022. The trade deficit for 2022 was officially recorded at $948.1 billion, growing by 12% when compared to 2021. When taking in the myriad of issues ranging from rising interest rates, high inflation, and global tensions, it is no surprise that America experienced such a large deficit. Stunningly, the U.S. has consistently had trade deficits since the 1970s, mainly due to the high volume of imports of oil and consumer goods. However, it is important to dissect and understand exactly why last year’s trade activity resulted in such a large margin of loss.
In the last two quarters of the year, imports of goods and services had fallen, being attributed to cooling consumer demand. When compared to 2021, consumer spending slowed toward the latter half of the year, with people interestingly spending less on goods such as home furniture and more on services like travel and dining. In the fourth quarter, exports had fallen as global commerce seemed to decelerate. After November, worldwide shipping demand had slowed following oversupply and excess inventory that had begun during the pandemic. Nevertheless, the new data that shows a calming consumer may continue to translate to companies’ earnings, which will be important to see and hear as we finish up this current earnings season.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.