U.S. current account trade deficit grows
by Associated Press
Published: March 18,2010
Tags: international trade
WASHINGTON — The current account trade deficit widened in the fourth quarter, reflecting an improving economy, but the imbalance for all of 2009 fell to the lowest point in eight years. Economists believe the deficit will increase in 2010 but not return to the record heights seen before the recession.
The Commerce Department said today the deficit in the October-December quarter jumped 12.9 percent to $115.6 billion, as imports of oil, autos and other foreign products outpaced the gains in U.S. exports.
For the year, the deficit in the current account plunged by 40.5 percent to $419.9 billion, the smallest imbalance since 2001. Last year’s deficit represented 2.9 percent of the total U.S. economy, the smallest percentage in 11 years.
The current account is the broadest measure of trade because it includes not only trade in goods and services, which are tracked by the government on a monthly basis, but also investment flows between countries. The figure is closely watched by economists because it is a measure of how much the country must borrow from foreigners to finance its balance of payments imbalance.
As America’s current account deficit soared to an all-time high of $803.5 billion in 2006, which represented 6 percent of total GDP. That raised alarm bells over whether foreigners would continue to be willing to finance America’s huge trade deficits. Now the bigger concern is over foreigners’ willingness to purchase U.S. Treasury securities to finance America’s soaring budget deficits.
Economists predict that the current account deficit will continue to widen this year but will not climb back to the previous record levels. They think that a weaker dollar will continue to boost U.S. exports. A weaker dollar makes U.S. goods more competitive in overseas markets and foreign goods more expensive for U.S. consumers.
For the fourth quarter, U.S. goods exports rose 8.8 percent to $263.6 billion with increases in shipments of autos, industrial supplies and farm products increases as an improving global economy boosted demand in key foreign markets.
But the rebound in the U.S. economy increased demand for imports as well. Goods imports rose in the fourth quarter by 9.2 percent to $432.4 billion, led by big gains in petroleum, capital goods, autos and auto parts and consumer goods.
The deficit in goods of $145.5 billion in the fourth quarter was offset somewhat by a $36.5 billion surplus in services trade, items such as transportation and financial services. The United States had a $25.1 billion surplus on investment flows and a deficit of $31.8 billion in a category known as unilateral transfers, which covers such things as foreign aid.
The country’s largest deficit with an individual country is the imbalance with China, which stood at $226.8 billion last year.
Lawmakers in both the House and Senate sought to increase the pressure this week on China to allow its currency to rise in value against the dollar.
U.S. manufacturers contend that China is violating global trade rules by holding down the yuan’s value against the dollar to make Chinese goods cheaper in the United States and American products more expensive in China. They contend that the yuan is undervalued by as much as 40 percent.
A group of 14 U.S. senators unveiled legislation Tuesday that would provide for penalty tariffs to be imposed on Chinese imports if China does not allow its currency to rise in value while 130 House members sent a letter to the administration Monday urging a tougher approach.
The Obama administration is hoping China will allow its currency to rise in value against the dollar as a way of narrowing the trade gap but Chinese Premier Wen Jiabao said Sunday that such efforts amounted to a kind of trade protectionism.
To sign up for Mississippi Business Daily Updates, click here.
Top Posts & Pages
- PSC unanimously rejects Entergy-ITC proposed merger
- Company mulling plan to build new pipeline
- Omega Protein shifting vessels to Mississippi
- IKE TROTTER: There are primary changes in Social Security for 2014
- Conservator: Schools had too many employees
- Bankrupt Simply Wheelz chooses prevailing bidder for assets
- Study says state sacrificing billions of dollars, 20,000 jobs in refusing Medicaid expansion
- Mars Food to celebrate 35 years in Port City
- Tennessee-based manufacturer sites plant in industrial park