US trade deficit narrows, interest rates unchanged in Europe

The US trade deficit backed off a little from record levels in November. Reuters reports:

The U.S. trade gap...narrowed 5.8 percent to $64.2 billion, still the third-highest level, from a record $68.1 billion in October, when imports of oil and petroleum products surged to make up for a drop in U.S. Gulf output after hurricanes Katrina and Rita...

U.S. exports of goods and services rose 1.8 percent to a record $109.3 billion. Exports of both capital goods and consumer goods set records in November...

Oil import prices...fell further in November... The volume of crude oil imports rose in the month, but the volume of all petroleum-product imports...fell from October levels.

Both factors helped trim imports to $173.5 billion, down 1.1 percent from the record set in October but still the second-highest ever.

Despite the fall in the deficit, Brad Setser thinks "higher trade deficits lie ahead". Menzie Chinn at Econbrowser also thinks that the trade balance remains in a downtrend, but adds that "deficits of this magnitude can't go on foreover" and "the economy is eventually headed toward a deficit of around $30 billion per month".

Elsewhere, the European Central Bank and the Bank of England both left interest rates unchanged yesterday. The latter, who had been contemplating interest rate cuts, would probably have second thoughts after the latest data on the UK economy, showing manufacturing output grew 0.4 percent in November -- its fastest pace in seven months -- as well as an estimate by the National Institute of Economic and Social Research that the UK economy grew by 0.5 percent in the three months to December, its fastest rate in four months.