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Trade deficits widened to record 2005 Original Source Link: (May no longer be active)
http://quote.bloomberg.com/apps/news?pid=10000006&sid=aCguTcwfqnNI&refer=homehttp://quote.bloomberg.com/apps/news?pid=10000006&sid=aCguTcwfqnNI&refer=home
Trade Deficit in U.S. Widened to a Record Last Year (Update2)
Feb. 10 (Bloomberg) -- The U.S. trade deficit widened to a record for a fourth straight year in 2005 as Chinese imports poured in and energy prices jumped to their highest ever.
American companies imported $726 billion more goods and services than they exported in 2005, the Commerce Department said today in Washington. The shortfall in December increased to $65.7 billion from $64.7 billion a month earlier.
Improvement in the trade deficit this year may prove difficult because the U.S. economy is stronger than most of its trading partners, economists said. China accounted for more than a quarter of the total U.S. deficit last year, the most for any country, eliciting a chorus of criticism from lawmakers about the Asian nation's trade and currency policies.
``There is still significantly stronger growth in the U.S. relative to the rest of the world,'' said John Shin, an economist at Lehman Brothers Holdings Inc. in New York. ``That's been the dominant factor in terms of continued large trade deficits and that's not going to change much this year.''
Imports in December rose to a record $177.2 billion, boosted by overseas shipments of business equipment, industrial supplies, motor vehicles and consumer goods including electronics. Exports also increased, to an all-time high of $111.5 billion.
The dollar extended a decline against the Japanese yen and fell versus the euro. Bigger deficits mean more dollars need to be converted into other currencies to pay for imports.
China Friction
The deficit with China narrowed 11.9 percent to $16.3 billion from $18.5 billion the previous month. The gap with China last year was a record $202 billion, compared with $162 billion in 2004.
The trade deficit with China has tripled since President George W. Bush took office, spurring legislation on Capitol Hill from lawmakers who say he hasn't done enough to open markets.
``There will be a continuous talk, but I think as far as passing legislation, I don't see it coming this year,'' Richard Shelby, an Alabama Republican and chairman of the Senate Banking Committee, said in a Feb. 8 interview in Washington.
Pressure on Currency
Democrats in the U.S. House of Representatives yesterday proposed a measure that would establish a congressional office where companies can bring their trade complaints. If that office determines the grievance to be valid, it would ask the U.S. Trade Representative's office to file a World Trade Organization case.
Lawmakers claim that China keeps the value of its currency artificially low, giving it an unfair advantage by making Chinese goods cheaper abroad. Shelby, chairman of the Senate Banking Committee, said that Treasury Secretary John Snow should name China a currency manipulator.
Economists expected the December deficit to widen to $65 billion from the originally reported $64.2 billion in November, according to the median of 60 estimates in a Bloomberg News survey. The monthly deficit was the third-largest ever. Economists' estimates ranged from $61.2 billion to $68.6 billion.
Imports of consumer goods in December rose by $1.8 billion, led by televisions, stereo equipment and pharmaceuticals. Overseas shipments of automobiles increased $498 million during the month, while imports of capital goods rose $815 million, reflecting more shipments of computers and industrial machinery.
Companies such as Toshiba Corp., Japan's second-largest chipmaker, are benefiting from an expanding U.S. economy and improving labor market in the U.S. Toshiba said sales rose 16 percent in the quarter ended Dec. 31 surged almost 14-fold on demand for flash memory chips used in mobile phones and portable music players such as Apple Computer Inc.'s iPod.
Crude Oil
Imports of industrial supplies increased $138 million to $49 billion, reflecting more shipments of iron and steel, lumber and aluminum. Imports of petroleum declined as the average price and volume fell.
The value of petroleum product imports, which include crude oil and refined products, fell to a seasonally adjusted $23.6 billion from $24.7 billion. The price of a barrel of crude oil averaged $49.76 in December, compared with $52.16 in November, and down from the post-Hurricane Katrina high of $70.85 on Aug. 30. The U.S. imported 311.5 million barrels of crude oil in December, compared with 314.4 million barrels in November.
The record trade bill last year was owed in part to a surge in crude oil prices which were the highest ever.
Aircraft Purchases
U.S. exports of capital goods, which include civilian aircraft, rose to $32.3 billion from $32.1 billion in November. Exports of industrial supplies, such as chemicals and fuel oil, increased to $20 billion from $19.4 billion.
Boeing Co., the world's second largest maker of commercial aircraft, said it shipped 11 planes to foreign customers in December, compared with 17 in November. Exports of civilian aircraft fell to $2.2 billion in December from $3.3 billion the previous month.
Exports of consumer goods rose to $10.6 billion from $9.9 billion and exports of automobiles and parts increased by $403 million.
The government estimated on Jan. 27 that the December deficit was about $65.5 billion when it calculated fourth-quarter growth, according to economists at Lehman Brothers Inc. The economy grew at a 1.1 percent annual rate in the final three months of last year.
`Way Out'
The U.S. economy may grow 3.4 percent this year after expanding 3.5 percent in 2005, based on a survey of economists last month from Blue Chip Economic Indicators. By comparison, economists in the Blue Chip survey expect Japan to grow 2.4 percent and countries that use the euro to expand 1.9 percent.
The dollar's 3.5 percent gain against a basket of major trading partners' currencies last year may have limited demand for U.S. exports last year, while making imports cheaper.
``The way out of these deficits is that the U.S. currency will start to come down over the next two to three years,'' said Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Massachusetts.
By region, the Commerce Department reported that the trade deficit with Japan narrowed to $6.8 billion from $7.3 billion. The deficit with the Organization of Petroleum Exporting Countries narrowed to $7.6 billion from $7.8 billion. For all of last year, the U.S. shortfalls with Japan and OPEC were the highest on record.
Elsewhere, the deficit with Canada, the largest U.S. trading partner, widened to $8 billion from $7.7 billion. The gap with Mexico narrowed to $4.3 billion from $4.6 billion. The deficit with the European Union narrowed to $10.1 billion from $11.2 billion.
Last Updated: February 10, 2006 09:26 EST
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