TRADE deficit widens by record amount
Tuesday, May 22nd 2001, 12:00 am
By: News On 6
WASHINGTON (AP) _ Americans' appetite for imported cars, clothes and toys sent the U.S. trade deficit surging by a record amount in March, only one month after a narrowing deficit had lifted forecasts for overall economic growth.
The Commerce Department said Friday that the trade imbalance jumped by 16.1 percent in March, to $31.2 billion. The $4.3 billion jump was the biggest one-month increase on record.
Economists predicted the sharp deterioration in trade in March would force a big downward revision in the gross domestic product for the January-March quarter.
The government originally reported that the GDP grew at a better-than-expected annual rate of 2 percent in the first quarter. That is likely to be cut to just 1 percent growth when the revised figure is released next Friday, said Merrill Lynch economist Stan Shipley.
``The economy remains weak, but not recessionary,'' he said.
Some economists saw a silver lining in the higher trade figure, because it reflected a surge in shipments of consumer goods, an indication that demand was staying strong in the sector that accounts for two-thirds of total economic activity.
``This indicates that the consumer is alive and well and fully capable of keeping the economy out of recession,'' said Joel Naroff, head of his own economic consulting firm in Holland, Pa.
For March, U.S. exports dipped 1 percent to $89 billion, reflecting widespread declines in manufactured goods from telecommunications equipment to commercial aircraft.
David Huether, an economist at the National Association of Manufacturers, said U.S. companies were being hurt by weak economic growth overseas and an 8 percent rise in the value of the dollar against major foreign currencies in the past year, which makes U.S. goods more expensive on overseas markets.
``The unsettling trend of near-stagnant export growth that began in June of 2000 continued into March,'' Huether said. ``U.S. export growth is likely to stay soft through December.''
The trade deficit through the first three months of this year is running at an annual rate of $365 billion, little changed from last year's all-time high deficit of $368.9 billion.
America's huge trade deficits present a political problem for President Bush, who is hoping to break a seven-year congressional logjam and win approval this year for the negotiating authority he needs to strike new free trade deals. Bush's goals include a Free Trade Agreement of the Americas that would expand the North American Free Trade Agreement to include Central and South America.
Critics charge that the rising deficits are an indictment of an approach to free trade that puts American jobs at risk to countries with low wages and lax environmental standards.
``The deficit numbers are the reverse of what (Bush) needs to sell his trade expansion plan to Congress,'' said Rep. Sherrod Brown, D-Ohio. ``As trade deficits explode, the president wants to expand NAFTA and jeopardize U.S. jobs.''
The March deficit of $31.2 billion was the highest since a $33.3 billion imbalance in January. The February deficit of $26.9 billion was the smallest monthly deficit since December 1999.
Imports, which had fallen in February, rebounded by 2.9 percent to $120.6 billion. The increase was led by a sizable $2.7 billion rise in demand for consumer goods, which pushed imports in this area up to $25.3 billion, led by increased demand for toys, clothing, televisions and VCRs.
Demand for foreign cars rose by $192 million to $15.4 billion. But imports of foreign oil fell by 5.3 percent to $9.1 billion, the lowest level since January 2000. The average price of a barrel of crude oil dipped by $1 to $22.76, the lowest since November 1999.
The deficit with China jumped by 13.1 percent to $5.7 billion in March even though U.S. exports rose to $1.9 billion, the second highest level on record with that country.
America recorded its biggest deficit last month with Japan, at $6.2 billion. For all of 2000, America's deficit with China surpassed the imbalance with Japan, the first time that had occurred on an annual basis.
The deficit with Mexico nearly doubled last month to a record $2.8 billion. The deficit with Canada, America's other partner in NAFTA, edged down 2.9 percent in March to $4.3 billion.
The deficit with the European Union soared by 47.1 percent to $4.8 billion in March.