- The Washington Times - Thursday, February 20, 2003

WASHINGTON, Feb. 20 (UPI) — The Commerce Department said Thursday the nation's trade deficit during December widened to a seasonally adjusted record of $44.2 billion from a revised $40 billion shortfall in November.

Most economists on Wall Street were expecting the trade gap to narrow to $38.7 billion during the month from the government's originally reported November gap of $40.1 billion.

The Commerce Department said for all of 2002 the nation's trade deficit jumped to $435.2 billion, its highest level on record and well above the previous record set back in 2000 of $378.7 billion.

The international trade measures the difference between imports and exports of both tangible goods and services. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade.

Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. Furthermore, the data can directly impact all the financial markets, but especially the foreign exchange value of the dollar.

Imports indicate demand for foreign goods and services here in the U.S. Exports show the demand for U.S. goods in overseas countries. The dollar can be particularly sensitive to changes in the chronic trade deficit run by the United States, since this trade imbalance creates greater demand for foreign currencies. The bond market is also sensitive to the risk of importing inflation.

This report gives a breakdown of U.S. trade with major countries as well, so it can be instructive for investors who are interested in diversifying globally. For example, a trend of accelerating exports to a particular country might signal economic strength and investment opportunities in that country.

Economists watch for the report not only to gauge U.S. and overseas demand but also to calculate gross domestic product. Imports are subtracted from economic growth, because they presumably replace U.S.-produced goods, while exports add to growth estimates.

The latest report from the Commerce Department showed all imports jumped 1.7 percent while exports fell 2.6 percent to $81.2 billion from $83.2 billion in November.

The value of imported crude oil fell to $7 billion from $7.2 billion in November and the average price per barrel of crude fell to $24.15 from $24.36.

Exports of consumer goods fell 3.7 percent after rising 0.1 percent in December and imports of autos and parts rose 1.4 percent in December after rising 4.4 percent during the previous month.

By region, the Commerce Department said the nation's trade deficit with Japan widened to $7.1 billion from $6.5 billion. The trade gap with China narrowed to $9.5 billion from $10.5 billion and the deficit with the Organization of Petroleum Exporting Countries widened to $3.2 billion from $2.9 billion.

The deficit with Canada, the nation's largest trading partner, widened to $4.6 billion from $3.7 billion. The gap with Mexico narrowed to $2.8 billion from $2.9 billion and the deficit with Germany widened to a record $4.1 billion from $3.3 billion.



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