Fuelled by a combination of soaring imports and fading exports, America’s trading account with the rest of the world plunged to its greatest-ever deficit in 2002, according to data issued Thursday by the Commerce Department.
With a shortfall of $44.2 billion (€40.87bn; £27.75bn) the US surged further into the red in December, hiking its total deficit for the year to $435.2 billion and shaving over half a percentage point from the 2.4% inflation-adjusted growth in gross domestic product. This had an adverse effect both on production and employment.
The news comes as no surprise to economists, many of whom have been aware for years that the unparalleled decade-long consumer and stock market boom enjoyed by US through the 90s had caused the nation to live beyond its means.
Close to a quarter of the 2002 deficit in goods trade was with China, which sold $103 billion more goods to the United States than it bought from it. Commented National Association of Manufacturers’ president Jerry Jasinowski: “In terms of trade, 2002 was a real downer. Manufacturing exports declined $34.2 billion, or 5.7%, to $563 billion.”
The decline is underscored by Commerce Department data. The 2002 deficit in trade of goods, such as motor vehicles, apparel, toys, computers, seafood and building materials, widened to $484.4 billion from $427.2 billion a year earlier. This combined with shrinkage in the nation’s longterm surplus in services trading. Income from tourism, royalties from films and financial services, fell to $49.1 billion from $68.9 billion the year before, reported the department.
But glimmers of reality are breaking through. Some see signs of improvement as 2003 gets under way, among them St Louis forecasting firm Macroeconomic Advisers LLC which recently advised its clients that growth appears “to be firming in the first quarter”.
In evidence it cites January’s solid rise in payroll numbers, non-auto retail sales and manufacturing production in. But the firm also warned: “New uncertainties have arisen over the fallout of war with Iraq and problems brewing on the Korean peninsula.”
Others, including Jasinowski, point to the over-valuation of the dollar which he says “remains a major impediment to our exports.” However, its value has recently declined, especially against the euro, which should help exports this year. But this is no instant remedy. “The improvement will likely be slow going,” Jasinowski warned.
Data sourced from: The Washington Post Online; additional content by WARC staff