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

Trade Data Analysis - The trade deficit has widened due to increased imports and a slight decline in exports, indicating resilient domestic demand [3][4] - The normalization of trade data is observed after significant volatility in 2025, with the deficit narrowing in the first half of the previous year [2][1] - The widening trade deficit is expected to negatively impact GDP calculations, although it may be offset by inventory building [5][4] Inflation Outlook - There is a divergence between CPI and PCE measures of inflation, with CPI trending lower while PCE has shown stronger performance [7][8] - The Federal Reserve targets PCE inflation, and the recent firmness in PCE reports suggests a hold on interest rates until leadership changes at the Fed [8][9] - Employment data has remained strong, reinforcing the expectation of maintaining interest rates in the near term [9] Economic Resilience - The U.S. economy has demonstrated resilience despite significant interest rate increases and trade policy volatility since 2022 [10] - Financial conditions have eased, and there is an increase in capital expenditure (CapEx) expected in 2026, along with consumer tax cuts anticipated in late Q1 and Q2 [11]