17 January 2003, 17:04  U.S. Trade Gap Widened to a Record $40.1 Billion in November

Washington, Jan. 17 (Bloomberg) -- The U.S. trade deficit widened to a record $40.1 billion in November as imports surged following a resumption of business at West Coast ports, a government report showed. The wider trade gap in goods and services followed a revised $35.2 billion shortfall in October and reflected a record inflow of holiday and other consumer merchandise, the Commerce Department said. Imports had declined in October, when ports in California, Oregon and Washington closed early in the month after shippers locked out union dockworkers in a labor dispute. By mid-November, most inbound ships had unloaded their cargo, leading to a rebound in imports. The deficit may keep widening in coming months as stronger economic growth in the U.S. boosts demand for foreign-made goods. South Korean-based Hyundai Motor Co. is among producers expecting to sell more in the U.S. this year. A growing trade shortfall subtracts from gross domestic product.
``America is addicted to low-cost consumer goods produced outside its borders,'' said Chris Rupkey, senior financial economist at Bank Of Tokyo-Mitsubishi in New York, before the report. ``The demand for imports will push the trade imbalance out to more worrisome levels in the months to come.'' Economists had expected a deficit of $36.4 billion compared with October's previously reported $35.1 billion gap, according to the median estimate of 60 forecasts in a Bloomberg News survey. Imports rose in November to $123.3 billion from $117.5 billion, the largest monthly increase since July 1984. The surge reflected stronger demand for automobiles, computers, toys, clothing and television sets.
Capital Goods
U.S. companies bought 9.6 percent more capital goods, including computers, telecommunications equipment and industrial machines. Imports of services also increased. Exports rose 1.1 percent to $83.2 billion in November from $82.3 billion in the previous month. Stronger imports were signaled by a rise in the Institute for Supply Management's factory index. The group's import index rose to 53.1 in November, signaling a rise in imports, from 48.7 the previous month. A number lower than 50 means a drop in demand for foreign goods. The supply managers' import gauge rose to 55.3 in December, suggesting imports kept rising. U.S. imports of automobiles and parts rose 4.3 percent to $17.5 billion. Hyundai Motor and affiliate Kia Motors Corp., South Korea's two largest automakers, expect to sell 12 percent more vehicles in the U.S. this year as demand for their vehicles grows. More than half of Hyundai Motor's sales come from exports, with about a fifth of total sales going to the U.S., its biggest export market.
U.S. Economy
The U.S. trade deficit with South Korea widened to a record $1.6 billion in November, today's statistics showed. Faster growth in the U.S. compared with its trading partners will probably keep imports growing faster than exports and widen the trade gap in coming months, economists said. The U.S. economy is expected to grow 2.8 percent this year while Japan, the world's second-biggest economy, is seen expanding 0.9 percent, according to consensus estimates of economists polled by Blue Chip Economic Indicators. The economy of the 12 nations that share the euro as their common currency is projected to grow 1.7 percent.
The value of imported crude oil fell to $7.2 billion in November from $8 billion in October. The U.S. imported 296.1 million barrels of crude oil and other petroleum products in November, down from 307.5 million a month earlier. The average price per barrel of crude fell to $24.36 from $26.17.
Higher Crude Oil Prices
Higher oil prices may give imports an added boost in coming months, economists said. The cost of imported petroleum surged 7.4 percent last month, the largest gain since April, after declining 9.2 percent in November, a report this week from the Labor Department showed. Exports of consumer goods rose 0.6 percent in November, today's report showed. Foreigners also bought 0.3 percent fewer capital goods. A drop in the value of the dollar last year may help stimulate exports by making American-made goods less expensive relative to foreign products, some economists say. The dollar is down 5 percent from its peak in January 2002 against a trade- weighted basket of currencies from 37 of the country's largest trading partners. ``Eventually you would expect some relief to our exports from the lower dollar, but I don't expect it until the end of the year,'' said Lara Rhame, an economist at Brown Brothers Harriman & Co. in New York, before the report.
Deficit With China
While the dollar's decline may lead to improved exports and a narrower trade deficit toward the end of this year and into next, in the shorter run it may cause the gap to widen by raising the cost of imports that already have been ordered, economists said. By region, the Commerce Department reported that the trade deficit with Japan held at $6.5 billion. The trade gap with China widened to $10.5 billion, the second-highest on record, from $9.5 billion. The deficit with the Organization of Petroleum Exporting Countries narrowed to $2.9 billion from $3.6 billion. Elsewhere, the trade deficit with Asia's newly industrialized countries widened to $2.8 billion from $1.8 billion. The deficit with Canada, the largest U.S. trading partner, narrowed to $3.7 billion from $4.3 billion. The gap with Mexico narrowed to $2.9 billion from $3.5 billion. The deficit with the European Union narrowed to $7.1 billion from $7.9 billion. //www.quote.bloomberg.com

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