Economy -- May Trade Deficit Hits Record

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this is the world where Y2k problems are occuring...

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May Trade Deficit Hits Record

http://news.excite.com/news/r/990720/11/news-economy-trade

Updated 11:05 AM ET July 20, 1999By Donna Smith

WASHINGTON (Reuters) - The U.S. trade deficit soared to a record $21.34 billion in May as imports jumped to new highs and exports of civilian aircraft, cars and other goods fell, the Department of Commerce said Tuesday.

The trade gap was much wider than the $19.2 billion deficit forecast by Wall Street analysts, and compared with an $18.6 billion deficit in April.

Imports rose for the fifth month in a row to a record $98.9 billion, reflecting a record $82.84 billion in imports of cars and other goods and bringing the deficit in merchandise trade to a record $28.21 billion, the department said.

U.S. Commerce Secretary William Daley said the deficit ran at an annual rate of $224.8 billion during the first five months of the year, which would be a new record after last year's record $164.3 billion. But as a percent of overall Gross Domestic Product (GDP), the deficit was running at a lower rate than the record levels of the 1980s.

He said the rise in imports reflected the U.S. economic strength and weakness in Europe and Asia. Daley said the U.S. economic fundamentals remained sound and any negative consequences to the U.S. economy from continued record deficits were a way off.

"At this point we seem to be quite a ways away from it," Daley said at a news conference.

But economists said the widening gap is likely to sap some strength out of the U.S. economy and some said they would lower their forecasts for Gross Domestic Product (GDP) growth.

"This is another big record," Ethan Harris, senior economist at Lehman Brothers told Reuters Television. "This is a big surprise, enough to change peoples' forecasts. We were looking at a GDP rise of 3.5 percent. "With this kind of trade number, with the U.S. spending leaking overseas, I would think we are going to be lowering our GDP forecast, maybe below three percent," he said.

But some questioned whether the lowered economic expectations would be enough to ease U.S. Federal Reserve concerns that the fast growing U.S. economy could overheat and spark a round of inflation.

The rise in imports underscores the strength of consumer spending in the United States, said John Lonski, chief economist of Moody's Investors Service.

"Even though this is a drag on GDP, this isn't a change that is going to please policymakers in the Federal Reserve," he said.

Bond prices hardly reacted to the data, after trading lower before the report was released.

The United States usually runs a deficit in goods trade and a surplus in services trade. In May, sellers of U.S. services, such as insurance companies and travel agents, enjoyed a record $23 billion in foreign sales, but that was not enough to offset the increase in imports of goods, the department said.

The department said the $3.6 billion May deficit with Western Europe was the highest since a July 1998 deficit of $5.3 billion.

In the first five months of the year, the United States marked up a $13 billion deficit with Western Europe, compared with a $7.6 billion gap in the same period last year, the department said.

The U.S. trade imbalance with China rose to $5.3 billion in May, the highest since October's deficit of $5.5 billion, from $4.8 billion in April.

The gap with Japan fell to $5.3 billion in May from $5.6 billion in April.

For the first five months the U.S. trade deficit with China was $23.7 billion, compared to $20.4 billion in the same period last year. The gap with Japan in the first five months was $27.3 billion, compared with $25.7 billion in the same period last year, the department said.

The U.S. trade gap with its North American Free Trade Agreement (NAFTA) partners, Canada and Mexico, also rose in May. The deficit with Canada rose to $2.3 billion in the month from $2 billion in April, while the gap with Mexico widened to $2.2 billion, the second highest on record, from $1.7 billion, the department said.

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-- forum regular (just w@nt to help.com), July 20, 1999

Answers

The "debt bomb" is why I worry about Y2K from an economic standpoint. I personally don't expect all computers to crash 1/1/2000, but a few major crashes might be enough to cause the "bubble to burst".

-- Anonymous99 (Anonymous99@Anonymous99.xxx), July 20, 1999.

quoting from American Machinist magazine, July 1999, p 36 :

"APRIL MACHINE TOOL CONSUMPTION DOWN

"April U.S. machine tool consumption totaled an estimated $391 million, according to AMT - The Association for Manufacturing Technology....With the year to date total computed at $1.5 billion, 1999 is down 44% compared to the same period in 1998."

[I'll let all of you make of that what you will...typos are mine]

keep your money and your powder dry - the ride is about to begin

Perry

-- Perry Arnett (pjarnett@pdqnet.net), July 20, 1999.


American business and government leaders have been patting themselves on the back for the past 5 years. They have been congratulating themselves on the booming stock market, low inflation, and low unemployment. They have claimed it was all due to the information revolution, free markets, budget discipline, and management wisdom.

They have conveniently left off one major factor -- the willingness of the rest of the world to allow us to charge their goods on our national credit card. Their investments in our stocks and bonds have also buttressed our economy. Should they get tired of this game or start to loose confidence, it will be a long slide down the bottomless pit known as U.S. indebtedness.

They should remember that a pat on the back is only a few inches about a kick in the can.

-- Mr. Adequate (mr@adequate.com), July 21, 1999.


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