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Why Spending On Services Can Help The Trade Deficit

In November, the gap in trade of goods and services rose to $80.2 billion.

As November's trade deficit widened even further, many wondered what a high number of imports would mean for local business.

According to Commerce Department data released on Thursday, the gap in trade of goods and services rose to $80.2 billion from a revised $67.2 billion in October while the trade deficit in goods rose to a record $99.0 billion. 

Imports increased by $12.3 billion to a record of $254.9 billion. Exports still rose but, at $49.5 billion from $48.3 billion, much less dramatically.

"Ports are still working through the backlog of ships waiting to unload, which could cause the seasonal jump in imports that usually peaks in October and November to bleed into December and January," PNC Senior Economist Bill Adams told TheStreet in a statement. "And the omicron wave is weighing on international travel, which will reduce U.S. services exports near-term."

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But while the goods trade deficit also hit a record high in November, the numbers we're currently seeing could signal an upcoming rebound. The deficit is below a September peak due in large part to services increases and a rebounding tourism industry.

According to Adams, consumer spending is poised to move more toward services throughout 2022 and, with it, boost business. Ramped-up domestic auto production as "carmakers get past the chip shortage" should also help narrow the current gap.

"Even so, the trade deficit will probably be flat to positive for real GDP growth in the fourth quarter of 2021, and then be a tailwind throughout 2022 as consumer spending redirects toward services and away from most consumer goods," Adams said.