Feb. 12, 2005 -- While America's economy was one of the healthiest in 2004, so was its appetite for imports, sending the trade deficit to a record $617 billion.
According to a Commerce Department report released Thursday, the United States trade deficit grew 24 percent in 2004 to $617.7 billion, or 5.3 percent of gross domestic product. In 2003, the trade deficit was 4.5 percent of GDP. The spike was attributed largely to the price of crude oil, which rose 28 percent, causing total imports of oil to increase 32 percent to $132 billion. Imports of all industrial supplies and materials also rose, climbing 31 percent in 2004, mainly because demand for such materials by China drove up prices throughout the year.
Although exports of both goods and services grew, the pace of imports was too rapid to keep down the deficit. Wachovia senior economist Mark Vitner pointed also to the rate of growth of other economies.
"The problem in services, and for a good part the problem in goods, is that the U.S. economy is simply growing much faster than the rest of the world," Mr. Vitner said.
Last year the U.S. expanded between 3 percent and 4 percent, while the European region and Japan grew 1.8 percent and 2.6 percent, respectively. Thus, according to Mr. Vitner, the United States needed the imports to fuel the economy, but didn't have the customers to ship exports.
America's trade deficit with China neared $162 billion in 2004, the highest trade deficit the United States has ever had with a single country. America's trade imbalance with Canada and Mexico were $65 and $45 billion, respectively.
With the dollar losing value over the last year, the trade deficit was expected to improve. According to Mr. Vitner, this may happen in the long run, but it takes time because of a lag. "Initially, the dollar has raised the price of imports, so it makes the deficit look a little bit worse," Mr. Vitner said.
By year's end, the trade deficit showed signs of slowing. Between November and December it shrunk 5 percent, thanks to an 11 percent drop in the price of crude oil.
In other economic news, the number of first-time jobless claims for the week of February 5, 2005, fell 13,000 to 303,000, the lowest level in four years.