Trade deficit swells to record $37.6 billion in May
Friday, July 19th 2002, 12:00 am
By: News On 6
WASHINGTON (AP) _ The United States trade deficit ballooned to a record $37.6 billion in May, reflecting Americans' ravenous appetite for foreign-made cars, TVs and clothes.
The Commerce Department reported Friday that the deficit was 4.1 percent higher than the revised $36.1 billion trade gap reported for April.
Many analysts were predicting a slight narrowing of the trade imbalance in May.
Separately, consumer prices edged up just 0.1 percent in June, after being flat in May, suggesting that inflation remains low and doesn't pose a risk to the economy.
The latest reading on the Labor Department's Consumer Price Index was better than the 0.2 percent increase in many analysts were forecasting.
The ``core'' rate of inflation _ excluding food and energy prices _ nudged up 0.1 percent in May, also better than expectations.
With inflation under wraps, the Federal Reserve has leeway to leave short-term interest rates _ now at 40-year lows _ alone for a while, economists say. Growing numbers of economists believe the Fed will keep rates unchanged through the rest of the year.
On Wall Street, stocks sagged. The Dow Jones industrial average was down 156 points and the Nasdaq index was off 12 points in the first hour of trading.
In the trade report, imports grew more than twice as fast as exports. Imports of goods and services increased 1.8 percent to $118.3 billion in May as the U.S. economic recovery helped to boost consumer demand for foreign-made goods.
Imports of automobiles and parts, and of consumer goods _ a broad category of items including TVs, VCRs, apparel, furniture and houshold appliances_ climbed to new monthly records.
Exports rose 0.7 percent to $80.6 billion in May. Although countries around the globe are regaining their strength after a worldwide slump, they are doing so more slowly than the United States, thus restraining demand for U.S. products.
The latest snapshot of trade activity comes as lawmakers in Congress are faced with having to reconcile different versions of legislation that would give President Bush authority to negotiate new international trade agreements.
Both House- and Senate-passed bills would allow the president to conclude international trade agreements subject to a yes or no vote in Congress.
But the Senate version provides greater benefits to workers laid off because of trade than the measure offered by the House. That is expected to be the biggest issue as the two chambers work toward a compromise.
Summoned to the White House on Thursday, Republican and Democratic lawmakers urged Bush to work harder to pass the so-called ``fast track'' or ``trade promotion authority'' legislation.
Labor and environmental groups and some Democrats are leery of the effects of free-trade agreements.
In May, imported automobiles, parts and engines rose to a record $17.9 billion, a 5 percent increase over April's level. Imported consumer goods also reached a record monthly level in May, rising to $25.6 billion.
A sharp rise in America's foreign oil bill also contributed to the trade gap in May. The average price of imported crude oil rose to $23.76 a barrel, the highest since February 2001.
On the export side, sales of capital goods, a broad category that includes computers, semiconductors and various machinery, accounted for much of the strength, rising to $24.3 billion in May, a 0.6 percent increase over April's level.
And, exports of automobiles and parts climbed to $6.8 billion, the highest level since August 2000. While exports of foods, feeds and beverages, and industrial supplies also showed gains in May, exports of consumer goods dipped to $6.9 billion, a 3.2 percent decline from April.
The U.S. dollar, which has been high-flying for years, has recently lost some altitude. U.S. manufacturers say that the strong dollar has hurt them by making their goods expensive to buy overseas.
Going forward, a weaker dollar and healing economies abroad should help bolster U.S. exports, economists say.
America's politically sensitive trade deficit with China widened to $8.1 billion in May from April as imports from China to the United States reached their highest level since October 2001.