US trade deficit heading towards record
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By Christopher Swann in Washington
Published: August 13 2005 03:00 | Last updated: August 13 2005 03:00
The US trade deficit rose by $3.4bn in June to $58.8bn and economists are bracing themselves for the gap to widen to a record over coming months.
The gap between imports and exports had appeared to stabilise in the second quarter. Companies drew down inventories, meeting demand with fewer imports. In addition, Boeing, the US aircraft maker, saw a sharp acceleration in sales growth.
But these trends appear to be unravelling, and economists said the deficit should soon surge past the $60.1bn (£33bn) record in February.
Companies are expected to rebuild their inventories and will step up imports to do so. Although aircraft orders were expected to remain strong, economists said, a further acceleration looked unlikely.
In addition, the soaring price of oil, which yesterday broke $67 a barrel, its fifth consecutive record, will boost the US import bill.
Imports of crude oil rose to $14.6bn in June compared with $13.7bn in May. The total for energy-related petroleum products came to $19.9bn, up from $18.6bn.
Import and export prices for July, published yesterday, pointed to a further rise in the cost of imports. Overall import prices rose by 1.1 per cent but the price of petroleum rose 6.6 per cent.
Economists are divided over how great a danger the increasing deficit will pose to the stability of the US economy. With the deficit heading towards 7 per cent of national income, some analysts fear the trade gap will undermine the dollar and push up interest rates.
Others say the deficit is a symptom of strong foreign demand for US assets. The US needs to draw in more than 80 per cent of the world's surplus savings to fund its current account deficit. The politically sensitive trade deficit with China increased by $1.8bn to $17.6bn. Any deterioration in this bilateral deficit has tended to inflame trade tensions with China. Despite a modest revaluation of the renminbi in July, many US policymakers argue that China unfairly supports its exporters through an undervalued currency and a protected domestic market.
Few signs remain that the depreciation of the dollar since its peak in February 2002 has been helping to close the deficit. The US currency has strengthened since January and the US economy has continued to outperform its main industrialised trading partners.
Since imports outnumber exports by a 1.6:1 ratio, exports must rise at a much faster pace than imports just to prevent the deficit from widening further
By Christopher Swann in Washington
Published: August 13 2005 03:00 | Last updated: August 13 2005 03:00
The US trade deficit rose by $3.4bn in June to $58.8bn and economists are bracing themselves for the gap to widen to a record over coming months.
The gap between imports and exports had appeared to stabilise in the second quarter. Companies drew down inventories, meeting demand with fewer imports. In addition, Boeing, the US aircraft maker, saw a sharp acceleration in sales growth.
But these trends appear to be unravelling, and economists said the deficit should soon surge past the $60.1bn (£33bn) record in February.
Companies are expected to rebuild their inventories and will step up imports to do so. Although aircraft orders were expected to remain strong, economists said, a further acceleration looked unlikely.
In addition, the soaring price of oil, which yesterday broke $67 a barrel, its fifth consecutive record, will boost the US import bill.
Imports of crude oil rose to $14.6bn in June compared with $13.7bn in May. The total for energy-related petroleum products came to $19.9bn, up from $18.6bn.
Import and export prices for July, published yesterday, pointed to a further rise in the cost of imports. Overall import prices rose by 1.1 per cent but the price of petroleum rose 6.6 per cent.
Economists are divided over how great a danger the increasing deficit will pose to the stability of the US economy. With the deficit heading towards 7 per cent of national income, some analysts fear the trade gap will undermine the dollar and push up interest rates.
Others say the deficit is a symptom of strong foreign demand for US assets. The US needs to draw in more than 80 per cent of the world's surplus savings to fund its current account deficit. The politically sensitive trade deficit with China increased by $1.8bn to $17.6bn. Any deterioration in this bilateral deficit has tended to inflame trade tensions with China. Despite a modest revaluation of the renminbi in July, many US policymakers argue that China unfairly supports its exporters through an undervalued currency and a protected domestic market.
Few signs remain that the depreciation of the dollar since its peak in February 2002 has been helping to close the deficit. The US currency has strengthened since January and the US economy has continued to outperform its main industrialised trading partners.
Since imports outnumber exports by a 1.6:1 ratio, exports must rise at a much faster pace than imports just to prevent the deficit from widening further
posted by Marcel at 3:13 PM
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