Trade deficit swells to record $40.1 billion in November; industrial production drops in December

<br>WASHINGTON (AP) _ The U.S. trade deficit bulged to a record $40.1 billion in November, reflecting Americans' ravenous appetite for foreign-made goods, especially toys, TVs and clothes. <br><br>The

Friday, January 17th 2003, 12:00 am

By: News On 6

WASHINGTON (AP) _ The U.S. trade deficit bulged to a record $40.1 billion in November, reflecting Americans' ravenous appetite for foreign-made goods, especially toys, TVs and clothes.

The Commerce Department reported Friday that the imbalance between what the United States sells abroad and what it imports swelled by 13.9 percent from the October deficit of $35.2 billion.

A second report, from the Federal Reserve, showed that the nation's industrial sector _ hardest hit by the 2001 recession _ stumbled in December, a victim of the uneven economic recovery.

Production at the nation's factories, mines and utilities dipped by 0.2 percent in December, more than erasing a 0.1 percent gain the previous month, the Federal Reserve reported.

December's performance was weaker than analysts were expecting. They were forecasting a 0.2 percent increase in industrial output.

Factories, which account for the lion's share of overall industrial output tracked by the Fed, saw production drop by 0.2 percent in December. That largely reflecting a sharp decline in the production of automobiles and parts.

Production at utilities fell 1.2 percent, while output at mines went up 1.6 percent.

For all of 2002, industrial production at factories, mines and utilities dipped by 0.6 percent, following a 3.5 percent decline in 2001. That represented the first back-to-back annual declines in industrial output since 1974-1975.

On Wall Street, stocks fell. The Dow Jones industrial average was off 71 points and the Nasdaq index was down 32 in the first half-hour of trading.

On the trade front, November's deficit was bigger than the $36.4 billion imbalance analysts were predicting.

Economists were forecasting a big widening in November's deficit as trade returned to more normal patterns following the resolution of a West Coast dock worker labor dispute last year.

The brief lockout had disrupted shipments in early October before President Bush used federal law to get dock workers back on the job. The dispute had cut into both imports and exports.

In November, both imports and exports rebounded. But imports grew more than three times faster than exports, thus propelling the trade deficit to an all-time monthly high.

``The trade deficit ... in November was simply incredible. No, make that incomprehensible,'' said economist Joel Naroff of Naroff Economic Advisors. ``No matter what, it happened. ... Oh well, I guess we really like foreign products.''

To combat the deficit, the Bush administration says the United States should seek to boost American exports by attacking foreign trade barriers, rather than raising barriers to imports coming into the country.

On Wednesday the administration announced it had cleared away the last hurdle to a free trade agreement with Singapore, wrapping up a deal a month after a similar one with Chile.

The administration hopes these agreements, which must be approved by Congress, will serve as a springboard to an even bigger prize, a free trade agreement covering 34 nations in the Western Hemisphere

In the trade report, imports of goods and service jumped by 4.9 percent to $123.3 billion in November as the U.S. economic recovery help boost consumer demand for foreign-made goods.

Imports of consumer goods _ a broad category of items that includes TVs, toys, apparel and household appliances rose by $2.7 billion to a new monthly record of $27.8 billion in November.

And, imports of foods, feeds and beverages also reached an all-time monthly high of $4.4 billion in November.

Exports, meanwhile, rose 1.1 percent to $83.2 billion in November. Although national economies around the globe are still recovering from a worldwide slump, they are healing more slowly than the United States and that has restrained demand for U.S. products.

Still, sales of U.S.-made consumer goods, such TVs and VCRs and toys, to other countries climbed to $7.3 billion in November, the highest level since July 2001.

But exports of cars slipped in November to $6.3 billion. Exports of capital goods, a broad category that includes airplanes, semiconductors, computers and medical equipment also lost ground, declining to $24.5 billion, in November.

By country, the United States' deficit with China widened to $10.5 billion in November, the second highest level on record.

The country's deficit with Japan increased to $6.5 billion in November as imports from the country climbed to the highest level since October 2001.

The trade deficit with Korea increased to a record $1.6 billion in November.

But the United States' trade deficit with Canada narrowed in November to $3.7 billion from $4.3 billion in October.

Going forward, a weaker U.S. dollar and healing economies abroad should help bolster U.S. exports, economists say.