U.S. trade deficit sets record in 2002

WASHINGTON -- The United States recorded a $435.2 billion trade deficit for 2002, the largest imbalance in history, as the weak global economy set back American exports while imports of autos and other consumer goods were hitting all-time highs.

In other economic news, the Labor Department reported Thursday that inflation at the wholesale level shot up by 1.6 percent in January, the biggest increase in 13 years, led by a sharp 4.8 percent rise in energy costs.

Even though the surge was concentrated in energy, prices of other items such as new cars showed big advances as well and the overall increase was certain to raise concerns about whether inflation, which has been well-behaved for years, was threatening to get out of control. The government will report on January consumer prices today.

Unemployment rises

The Conference Board in New York reported that its Leading Index of Economic Indicators declined by 0.1 percent in January, after three consecutive months of increases. The Conference Board initially reported that the index was unchanged in January but later said that reported was based on incorrect data.

Meanwhile, the Labor Department said that the number of newly laid-off workers filing unemployment claims jumped to a seven-week high of 402,000 last week, up by 21,000 from the previous week, showing that the labor market is still struggling with an uneven economic recovery.

The trade report showed that even in agricultural products, normally a U.S. bulwark, Americans bought more imported wine, cheese and other foods than American farmers were able to sell abroad -- resulting in only the second U.S. trade deficit in farm goods on record.

The Commerce Department reported Thursday that the deficit for all of last year was up 21.5 percent from the $358.3 billion trade gap recorded in 2001 and surpassed the old record deficit of $378.7 billion set in 2000.

By country, the United States ran up the largest trade gap with China, a deficit of $103.1 billion, marking the third straight year that the United States has recorded its largest trade deficit with that nation. It pushed the former front-runner in this category, Japan, into second place.

In addition to the record for all of 2002, the United States set a new monthly high of $44.2 billion in December, up 10.5 percent from the previous record set in November of $40 billion.

Opponents of President Bush's trade policies contend that the huge trade deficits represent the loss of millions of manufacturing jobs as U.S. companies have been battered by what the critics say is unfair competition from low-wage countries that stifle labor rights and have lax environmental protections.

However, the administration contends that it is pursuing the correct procedure in trying to cut global trade deals that will lower high barriers in other countries in a way that boosts American exports.

American manufacturing companies have been lobbying for the Bush administration to drop its support for a strong dollar policy, arguing that an overpriced dollar has made their goods noncompetitive in foreign markets while opening them to a flood of competition from cheaper priced imports.

Treasury Secretary John Snow, who was meeting with British finance officials on Thursday on his way to a weekend meeting in Paris of America's major economic allies, insisted during his Senate confirmation hearing that the administration intends to make no change in its strong dollar policy. A strong U.S. dollar makes investments in U.S. stocks and bonds more attractive to foreigners.

For 2002, exports of goods and services fell 2.5 percent to $973 billion, marking the second consecutive annual decline, as American exporters found it increasingly difficult to sell overseas. This reflected a spreading global economic slowdown and the strong dollar.

American manufacturers were the hardest hit sector of the economy during the 2001 recession with a loss of nearly 2 million workers. While the economy began a recovery in 2002, the progress has been uneven and so far it has not resulted in a rebound in hiring.

American imports, which fell 6 percent in 2001, reflecting the U.S. recession, staged a rebound in 2002, rising by 3.8 percent to $1.41 trillion. That, however, was still below the all-time high of $1.44 trillion set in 2000.

But in individual categories, imports of autos and auto parts set a record high $203.9 billion and imports of other consumer goods, a category that includes everything from clothes to televisions and toys, also hit a record high of $307.7 billion last year.

Imports of oil totaled $103.6 billion last year, basically unchanged from the level in 2001.

After China, deficits with other countries included imbalances of $$70.1 billion with Japan; $49.8 billion with Canada and $37.2 billion with Mexico.

On the export side, manufactured goods suffered a setback but sales of American farm products managed to eke out a tiny 0.3 percent increase to $49.54 billion last year over the 2001 level.

However, imports of farm products rose a much faster 6.6 percent to $49.72 billion, representing in a deficit in farm trade of $176 million, the second such deficit in history. Farm imports topped exports in 1986 as well.