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US trade gap widened in april to record 48b { June 14 2004 } Original Source Link: (May no longer be active)
http://www.nytimes.com/2004/06/14/business/14CND-TRAD.htmlhttp://www.nytimes.com/2004/06/14/business/14CND-TRAD.html
June 14, 2004
U.S. Trade Gap Widened in April to Record $48.3 Billion
By KENNETH N. GILPIN
The nation's trade deficit widened in April to a record $48.3 billion, the Commerce Department reported this morning, as America's appetite for imported goods and services continued to grow.
The trade gap comes after a $46.6 billion deficit in March. Most economists had forecast that the April numbers would narrow a bit.
On an annualized basis, the April numbers translate to a trade gap of about $575 billion, or nearly 5 percent of gross domestic product.
Federal Reserve Board chairman Alan Greenspan has argued that the burgeoning trade deficit, which must be financed by importing capital from abroad, is not a source of serious concern.
Part of the Fed chairman's argument is based on the fact that in the age of globalization, multinational corporations are shifting sources of production around the world. Those shifts, he maintains, have reduced the relevance of America's trade figures as a reflection of the country's competitive position on world markets. Moreover, the rising trade deficit reflects the fact that relative to the rest of the world the American economy is growing very rapidly.
Still, the burgeoning deficits should be a source of concern, some economists said.
"The trade deficit is less of a manifestation of companies and countries competing fairly or unfairly, and more a reflection of our lack of national savings," said Steven Roach, chief economist at Morgan Stanley.
"We have such a low savings rate that we need to import surplus savings from abroad. To me, the trade deficit reflects America's penchant to consume beyond our means, and that is a serious problem."
During April, imports rose by 0.2 percent, to $142.3 billion. But exports fell by 1.5 percent, to $93.9 billion.
"It would have been a better picture if exports had risen along with imports," said Robert Hormats, vice chairman of Goldman Sachs International.
"But when you get an economy as strong as the U.S. is relative to its trading partners, this is the result."
Many analysts had expected that the decline in the value of the dollar on foreign exchange markets over the last 18 months to two years would lead to a narrowing of the trade gap. In fact, until the past few months, the deficit appeared to have stabilized, although at a very high level.
Now, however, economists said it very much looks like the deficit picture has worsened further.
"I was not convinced there was a renewed deterioration under way," said David Hendley, an international economist at JP Morgan Securities. "It is getting harder to say that now. Despite pretty decent export growth over the last year, import demand is running faster. That is not the recipe to even stabilize the deficit."
Imports rose even though the value of oil imports fell during April, to $9.7 billion from $10.2 billion the previous month.
The average price of oil was $31 a barrel during April, the highest since February, 1983. In March, the average per barrel price was $30.64.
Imports of autos and parts increased to a record $19 billion. And Americans bought $31.7 billion worth of imported consumer goods, led by pharmaceuticals, furniture and televisions.
"For those who had hoped to see a decline in the trade deficit, we will have to see a further decline in the dollar or more growth abroad, or both," Mr. Hendley said.
Foreign currency traders took the news of the wider trade deficit in stride. The value of the dollar eased a bit against the Euro and the Japanese yen in foreign exchange markets, but the move was extremely slight.
"In a normal environment, the dollar would be declining in value as part of the correction process," Mr. Hormats said.
"But currency policy, particularly in Aisa, is effectively an exports and jobs policy. These countries are willing to keep buying dollars to support that policy."
Copyright 2004 The New York Times Company
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