Highlights
The U.S. trade gap worsened in November to $63.1 billion from a revised $57.8 billion shortfall in October. The November trade deficit was much wider than the consensus forecast for a $58.6 billion figure and compares with the initial estimate for October of $57.8 billion. The deterioration in the gap was due to an acceleration in import growth while exports gains slowed. Both petroleum and nonpetroleum imports jumped in the latest month. On the export side, the softening was mainly due to a drop in aircraft shipments. Today's report will weigh on the dollar. Other than in exchange markets, most traders will be focusing on further analyzing Fed Chairman Bernanke's comments from yesterday along with how major financial acquisitions are soothing the markets.

The merchandise trade deficit (Census basis) in November soared to $70.6 billion from a revised $65.0 billion deficit in October. The goods gap excluding petroleum grew to $40.6 billion in November from $38.6 billion in October. Oil prices continue to rise, boosting the oil deficit and the overall trade gap. The oil trade deficit widened in November to a record $30.0 billion from $26.3 billion the month before. Crude oil prices in November spiked to a record $79.65 per barrel from $72.49 per barrel in October.

Goods export strength in November according to end-use categories was in foods, feeds & beverages with a $427 million boost. Industrial supplies rose $192 million. Declines were led by capital goods ex autos with a $902 million drop with civilian aircraft pulling that category down by $948 million. Exports of consumer goods slipped $115 million.

Goods import strength in November was in industrial supplies which jumped $4.655 billion and included a $3.716 billion boost in crude oil imports. Gains were also seen in foods, feeds & beverages, up $172 million; capital goods ex autos, up $162 million; automotive, up $135 million; and consumer goods, up $796 million.

On a bilateral basis, the goods deficit with Canada decreased from $5.4 billion in October to $4.7 billion in November. The goods deficit with China decreased from $25.9 billion in October to $24.0 billion in November. The goods deficit with the European Union decreased from $11.9 billion in October to $10.4 billion in November.

Overall, imports continue to surge despite the weaker dollar. While much of the gain is due to higher oil prices, even consumer goods spiked - which makes no sense with the softening in the U.S. economy. There likely will be significantly weakening in that component soon. On the export side, we should see a rebound in aircraft exports since orders are strong. But even taking aircraft into account, November exports were on the soft side. That will need to improve to keep supporting U.S. manufacturing.

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