US Runs Annual Trade Deficit Up to $901 Billion, One of Biggest Since 1960

• The US trade deficit is widening due to resilient domestic demand and increasing imports, potentially dragging down GDP, but may be offset by inventory build.
• A divergence exists between CPI (trending lower) and PCE (firmer) inflation, with the Fed targeting PCE.
• Firm PCE data and resilient employment suggest the Federal Reserve will likely keep interest rates on hold through H1 2024.
• Easing financial conditions, increased AI capital expenditure, and upcoming consumer tax cuts are expected to support GDP growth this year.

Blerina Uruci discusses the US trade deficit widening due to resilient domestic demand and increasing imports, which could negatively impact GDP but may be offset by other factors. She highlights a divergence between CPI and PCE inflation, with PCE firmness suggesting the Fed will likely hold interest rates steady through the first half of the year, supported by the economy's remarkable resilience, easing financial conditions, and upcoming stimulus.