Another fracking benefit: Trade

January 7, 2015 10:45 AM

The trade deficit narrowed more than forecast in November as U.S. petroleum imports sank to the lowest level in more than five years.

The gap shrank 7.7 percent to $39 billion, the smallest since December 2013, from October’s $42.2 billion, Commerce Department figures showed today in Washington. The median forecast in a Bloomberg survey of 69 economists projected $42 billion. The smallest quantity of crude oil imports in more than two decades and the lowest prices in four years combined to limit the value of foreign-fuel purchases.

A combination of rising supply as domestic production picks up and slower growth overseas that’s reducing demand is leading to a rout in oil prices that has continued into 2015. Outside of fuel, Americans bought record amounts of consumer goods that shows the world’s largest economy is strengthening.

The drop in oil prices is “going to put some downward pressure on the trade deficit in the near term,” said Gus Faucher, an economist at PNC Financial Services Group Inc. in Pittsburgh, who projected a smaller trade gap. “Once oil prices stabilize, I think we’ll see the trade deficit expand a bit.”

Companies added more workers than forecast in December, indicating the job market was sustaining strength as 2014 drew to a close, another report showed today. Employment increased by 241,000 after a 227,000 gain in November, according to figures from Roseland, New Jersey-based ADP Research Institute.

 

Shares Climb

Stock-index futures rose, signaling equities may halt their worst start to a year since 2008, on the gain in employment and the narrowing of the trade gap. The contract on the Standard & Poor’s 500 Index maturing in March climbed 0.8 percent to 2,009.7 at 8:49 a.m. in New York.

Bloomberg survey estimates for the trade gap ranged from deficits of $39 billion to $43.9 billion. The Commerce Department initially reported a $43.4 billion shortfall for October.

Imports dropped 2.2 percent, the most since June 2013, to $235.4 billion from $240.6 billion in the prior month.

The U.S. imported $23.1 billion worth of petroleum in November, the least since August 2009. The 189 million barrels of foreign crude oil purchased during the month were the fewest since February 1994, and the $82.95 average price per barrel was the lowest since December 2010.

Excluding petroleum, the trade gap would have been little changed in November at $27.6 billion compared with $27 billion the prior month.

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