International Trade Declines
January 21, 2009—Falling energy prices and weak consumer demand contributed to a decline in international trade in November. In December, retail sales declined 2.7%, the Consumer Price Index fell 0.7%, and the Producer Price Index was down by 1.9%.
According to the Bureau of Economic Analysis, U.S. trade in goods and services narrowed significantly to $40.4 billion in November from $56.7 billion October. Both imports and exports decreased, by 12% and 5.8%, respectively. Petroleum imports fell 40% to $19.4 billion, and U.S. auto exports dropped 10.8%. Imports and exports are likely to continue to weaken because of global liquidity problems.
Retailers endured a brutal holiday shopping season. Total retail sales in December fell 2.7% following a 2.1 % decline in November. Gasoline stations (-15.9%), building material dealers (-2.9%), and clothing stores (-2.5%) posted the steepest declines. Core sales, which exclude sales made at gasoline stations and auto dealerships, posted a 1.5% decrease. On a year-to-year basis, top-line retail sales decreased 9.8%, while core sales were down 2.2%. Weak or negative retail sales growth should continue in the near term as beleaguered consumers face the financial meltdown, a weak labor market, and the housing crisis.
Consumer Price Index
The Consumer Price Index (CPI) fell 0.7% in December after decreasing 1.7% in November. The drop was due to a combination of falling energy prices (down 8.3%) and weak consumer demand. Food prices were unchanged from November to December. The core CPI, which excludes food and energy prices, remained unchanged for the second consecutive month. On a year-ago basis, the top-line CPI decreased 0.1% while the core CPI rose 1.7%. Deflation appears to be a growing concern.
Producer Price Index
Producer prices for finished goods decreased 1.9% in December after falling 2.2% in November. The decline came as energy prices fell 9.3% for the month. Core prices, which exclude food and energy prices, increased 0.2% for the month.