U.S. trade deficit fell in 2023 to the lowest level in 3 years and boosted GDP

In December, the trade gap widened by 0.5% to $62.2 billion. It was sharply lower compared to the same month a year earlier, however.

Key details: Imports fell 1.3% in December to $320.4 billion, the government said Wednesday.

For the full year, imports declined 3.6% from a record $3.65 trillion in 2022.

The drop in imports mostly reflected two things: The lower cost of oil and less household demand for consumer goods such as computers and cell phones.

Instead Americans have been spending more on services such as travel and recreation.

U.S. exports also rose 1.2% in December to a $258.2 billion, clinching a record high in 2023. That also gave a boost to the economy.

A weaker dollar and rising U.S. oil shipments helped deliver last year’s record exports, but weaker economic growth around the world could exert a negative influence in 2024.

“Export growth is surely likely to moderate soon,” said deputy chief U.S. economist Andrew Hunter of Capital Economics.

Big picture: The U.S. trade deficit was driven to record highs during the pandemic because of seismic shifts in the global economy.

Now the deficit has tapered off to more normal — though still high — levels as the lingering effects of the pandemic fade away. It’s unlikely to contribute much to GDP in 2024.

Market reaction: In premarket trades, the Dow Jones Industrial Average
DJIA,
+0.16%
and S&P 500
SPX,
+0.34%
rose in Wednesday trades.