The Wall Street Journal-20080112-Oil Prices Pump Up Trade Deficit
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Oil Prices Pump Up Trade Deficit
WASHINGTON -- The nation's trade deficit widened to its biggest gap in 14 months in November, as record oil prices overwhelmed rising U.S. exports.
The U.S. deficit in international trade of goods and services surged 9.3% to $63.12 billion from October's revised $57.77 billion, the Commerce Department said.
The deficit swelled even as the volume of crude imports shrank and exports rose. As a result, it is unlikely that trade helped the weakening U.S. economy in the fourth quarter of 2007. Ian Shepherdson, chief U.S. economist for High Frequency Economics, said in a note that "based on these numbers and our December forecasts, we think trade will make a minimal contribution" to fourth-quarter growth, "which looks likely to be in 1.5%-to-2% range."
Economists at Barclays Capital said the report suggests that trade "may be a slight drag" on growth. They have been projecting fourth- quarter growth of 1% and said the trade report reduces the likelihood that the economy will grow more than that.
The $63.12 billion November trade deficit was the largest since $64.15 billion in September 2005. Exports climbed 0.4% to $142.31 billion from $141.68 billion in October. Imports increased 3% to $205.43 billion from $199.45 billion.
The U.S. deficit with China was $23.95 billion, down from October's $25.93 billion. Some lawmakers have complained bitterly about the trade gap and threatened to impose economic sanctions if China doesn't allow its currency to increase in value against the dollar.
Meanwhile, the Labor Department reported that import prices were unchanged in December, after rising a revised 3.3% in November. However, for 2007 as a whole, import prices posted their largest calendar-year increase on record, reflecting higher prices for oil and goods from China.
For all of last year, import prices soared 10.9%, a sharp acceleration from the 2.5% gain registered in 2006, and the highest calendar-year increase since the government began compiling the data in 1987.
Federal Reserve officials have warned that higher import prices, as well as energy and commodity prices, pose an inflation risk. But Federal Reserve Chairman Ben Bernanke, in remarks Thursday, signaled the possibility of "substantive" additional interest-rate cuts, indicating that concerns about inflation are being overtaken by worries about economic growth.
Prices of goods from China rose 0.1% in December and 2.4% for the year, a record increase. That suggests the U.S. can no longer count on cheap imports from China to offset domestic price pressures.
The government will release the more closely watched U.S. producer and consumer price data this week.
