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Trade gap hits record
U.S. deficit with other nations widens to $42.5B in December, hits record $489B for year.
February 13, 2004: 4:08 PM EST

NEW YORK (CNN/Money) - The nation's trade deficit jumped about 11 percent in December as strong economic growth pulled in record imports and exports inched lower despite a weaker dollar, the government reported Friday.

The gap came in above the average forecast by private economists. For the full year, the trade deficit was a record $489.4 billion, up 17 percent from 2002.

The deficit grew to $42.48 billion from a revised $38.35 billion in November. Economists, on average, expected the trade gap to rise to $40 billion, according to Briefing.com. December's gap was just a bit below the record trade gap in March of $42.9 billion.

Exports fell 0.2 percent to $90.4 billion despite the weaker dollar, after rising 2.8 percent in November. Imports rose 3 percent to $132.8 billion after falling 0.6 percent in November.

On Wall Street, stocks fell after the report while Treasury bond prices rose. The dollar rose against the euro and edged higher against the Japanese yen.

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The value of the dollar has dropped in recent years, due in part to the wide trade gap. But the dollar's fall has helped U.S. exporters by making their goods cheaper overseas, and U.S. policy makers have done little to stop it.

The dollar has changed little against the currency of China, the biggest U.S. trading partner, since that nation pegs its currency to the greenback.

The U.S. trade gap with China shrank a bit in December to $9.9 billion from $10.8 billion in November. For the full year, however, it rose to a record $124 billion.

"(The data are) suggesting the decline we've seen in the dollar over the last couple of years is not having an impact. It suggests the dollar may still need to fall to help narrow the trade deficit. But there's a risk to higher inflation if it does," Gary Thayer, chief economist at AG Edwards & Sons in St. Louis, told Reuters.

A separate Labor Department report showed the price of imported goods rose sharply in January, a sign the weaker dollar may finally be making itself felt on the price end.

U.S. import prices rose 1.3 percent last month, the biggest climb since February 2003, after a revised 0.5 percent advance in December, the Labor Department said. Wall Street had forecast a milder 0.4 percent gain.

In testimony this week to Congress, Fed Chairman Alan Greenspan seemed comfortable with the dollar's decline, saying foreign companies had so far been able to absorb the impact. He said the weaker currency would also eventually help contain the trade gap as foreign producers export less to the United States.

Analysts said the larger-than-expected trade deficit could require the government to trim its estimate of fourth-quarter economic growth, currently pegged at 4.0 percent.

"It's probably going to knock about 0.4 percent off GDP revisions for the fourth quarter," said David Sloan, an economist with 4Cast in New York.  Top of page


-- from staff and wire reports




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.