Your Economy (No Politics)

[Bullwinkle]

US trade deficit falls to 64.2 billion dollars
January 12, 2006


WASHINGTON (AFP) - The US trade deficit narrowed to 64.2 billion dollars in November thanks to cheaper oil and a recovery in aircraft exports, data showed.

But with December's figures still to come, the 661.8-billion-dollar deficit run up in the first 11 months of 2005 has already smashed the annual record set in 2004 of 617.6 billion dollars.

The latest figure was less than the revised record high deficit of 68.1 billion dollars reached in October, the Commerce Department said, and was also less than Wall Street forecasts for a November trade gap of 66.0 billion.

The US trade account benefited from falls in energy prices and in imports of consumer goods, after retailers had stocked up in October to get their stores full for the festive season rush.

But while down, the US trade deficit remains hefty enough to warrant concern from economists about how much longer the economy, and the dollar, can sustain such a gaping shortfall in goods and services.

The net drag on growth exercised by the deficit is likely to shave one or two percentage points off US growth in the fourth quarter, analysts believe.

"The deficit's probably going to get bigger in the near term," Wachovia global economist Jay Bryson said.

"Imports are almost twice as large as exports, so just to stabilize the deficit, exports have to grow twice as fast, which is not going to happen," he said.

"To get exports growing that fast, we would have to see either a US economic collapse or massive acceleration in overseas growth."

Democratic opponents to President George W. Bush's administration have said the deficit highlights a chronic problem in the US economy, focussing their fire on China's exploding surpluses over the United States.

The US trade deficit with China accounted for more than one-quarter of the total November gap, at 18.5 billion dollars. But the China deficit was down nearly 10 percent from October's figure.

"The dollar's still strong against the Chinese currency and China continues to expand its capacity to flood the world with consumer goods," Nomura chief US economist David Resler said.

"We're going to continue to pull in a lot of imports from that country, and that trend won't reverse even if there is a significant revaluation of the yuan," he said.

Overall in November, imports slipped 1.1 percent month on month to 173.5 billion dollars to post their first decline since July. Exports widened to a record 109.3 billion dollars.

The petroleum deficit narrowed 4.1 percent to 22.88 billion, the first decline since May.

Exports of civilian aircraft rose 27.4 percent to 3.2 billion dollars, reflecting strong orders by Boeing Co. as the aviation giant returned to normal after a damaging strike by its machinists in September.

In a separate report watched closely by the Federal Reserve, the Labor Department said prices of imported goods fell for the second consecutive month in December as oil prices retreated from summer highs.

Import prices fell 0.2 percent in December after a revised 1.8 percent decline in November. Excluding petroleum, import prices were unchanged in December.

While the massive US deficit has been the cause of much hand-wringing among experts, not everyone is convinced the US economy is destined to hit the buffers as a result.

Skeptics can argue that over 2005, the dollar managed to post hefty gains against major currencies even as the United States sucked in ever-larger numbers of imports.

"In today's integrated global economy, given the liquid nature of capital flows, an individual trade balance doesn't mean so much. A lot of the anxiety is overblown," Nomura's Resler said.

http://news.yahoo.com/s/afp/20060112/ts_alt_afp/useconomytrade_060112163246