Oil prices lift U.S. trade deficit--US$43.5B nears record
Peter Morton <a href=www.nationalpost.com>Financial Post, with files from Reuters Wednesday, May 14, 2003
WASHINGTON - Soaring oil imports in March helped push the U.S. trade deficit to near record highs even as American exporters are beginning to see a turnaround in sales abroad.
The U.S. deficit hit US$43.5-billion, up from the US$40.4-billion shortfall in February, the U.S. Commerce Department said yesterday. The March deficit is just shy of the record US$44.9-billion deficit last December.
Economists said oil imports surged in March as U.S. refineries began to rebuild stocks after the oil workers strike in Venezuela and war worries pushed global oil prices higher.
"Away from energy, we don't expect much of an improvement in the trade balance over the next few months," said Kevin Logan, a senior market economist at Dresdner Kleinwort Wasserstein in New York. "Other economies are still quite weak, with growth very sluggish, so we don't expect the demand for exports to increase much."
The U.S. economy grew at a 1.6% annual rate during the first quarter while Japan is expected to see growth of just 0.4% during the same period. Most economists believe the economy of the European Union likely shrank during the first three months of the year.
U.S. exporters did see a 0.6% increase in foreign sales to US$82.8-billion in March from US$82.3-billion the previous month, mostly of semiconductors and consumer goods, thanks to a weaker U.S. dollar.
"It's kind of hopeful that we're seeing a modest increase in exports, which is better than the declines we had seen earlier," said Jade Zelnik, chief economist with RBS Greenwich Capital Markets, in Greenwich, Conn. "So perhaps the weaker dollar is beginning to support exports."
The administration of George W. Bush appears to be quietly changing a decade-old "strong dollar policy" with John Snow, the Treasury Secretary, repeating that a "sound currency" is key to a sound economy.
The U.S. dollar fell to a four-year low against the euro Monday after Mr. Snow said on the weekend a weaker dollar would help U.S. exports. The U.S dollar has fallen by 28% against the euro over the past 12 months and 17% over the past six months. It has also fallen by 12% against the Canadian dollar and by 5% against a basket of currencies from the U.S.'s biggest trading partners.
"Persistent weakness in the dollar and an expected rebound in overseas growth later this year should help to improve the U.S. trade picture down the road," said Joseph Abate, senior economist at Lehman Brothers Inc. in New York.
The weak dollar may have also contributed to a 2.9% increase in imports in March to US$126.3-billion -- the second highest on record after September, 2000. Imports from Western Europe also jumped in March to a new record as the trade deficit with the EC countries rose to US$7.8-billion from US$6.6-billion.
The value of crude oil imports surged to a record US$9.1-billion from US$7.5-billion the previous month while the U.S. imported 300.7 million barrels of oil in March, up from 247.1 million the previous month.
The U.S. trade deficit with Japan widened to US$5.8-billion from US$5.3-billion while its deficit with the Organization ofPetroleum Exporting Countries expanded to a record US$5-billion from US$3.4 billion.
Its deficit with Canada, its largest trading partner, hit US$5.2-billion from US$4.3-billion in February. The deficit with its other NAFTA partner, Mexico, remained steady at US$3.9-billion.
Meanwhile, John Manley, Canadian Finance Minister, said yesterday he will bring concerns about large U.S. current account and trade deficits to a finance ministers meeting of Group of Seven nations this week.