WASHINGTON (Reuters) - The U.S. trade deficit widened by $3.81 billion, or more than 15 percent, in January, as the recovering U.S. economy spurred purchases of foreign goods and overseas demand for American products eroded further, the government said on Tuesday. ADVERTISEMENT
In a monthly report, the Commerce Department said the trade deficit increased to $28.52 billion in January from a revised tally of $24.71 billion in December.
Most of the change came from imports, which rose to $106.49 billion in January from $102.76 billion in December as U.S. businesses replenished depleted inventories. Exports fell to a three-and-a-half year low, fueling a renewed clamor from manufacturers unhappy with the strength of the U.S. dollar.
The wider-than-expected January trade gap -- a Reuters poll of analysts had yielded a forecast of a $27.27 billion deficit -- was more evidence of recovery in the U.S. economy from a mild recession that began in March 2001.
The improvement in the economy's health was expected to lead Federal Reserve policymakers to drop a 15-month-old warning about recession risks when they wrap up a one-day policy-setting meeting later on Tuesday.
However, retail sales at discount, chain and department stores softened in the latest week as slower traffic at department stores more than offset gains at discount retailers, two reports on Tuesday showed.
Although consumer spending -- which accounts for two-thirds of U.S. economic activity -- has held up well during the recession, the uneven pace of sales in the past few weeks suggests the economic recovery will be gradual, analysts said.
Instinet Research's Redbook Retail Sales Average slipped 0.7 percent in the two weeks ended March 16 from the same period last month.
Separately, the Bank of Tokyo-Mitsubishi and UBS Warburg said U.S. chain store sales edged up 0.1 percent in the week ended March 16, but that came on the heels of three straight weekly drops. Sales dipped 0.7 percent the prior week.
STRONG DOLLAR CLAMOR RISES
The latest trade data renewed calls from U.S. manufacturers for the Bush administration to take action to reduce the value of the dollar, which they blame for exports falling to a three-and-a-half year low in January.
``The situation has gotten out of hand. We figure, conservatively, that the export decline has cost over 500,000 jobs in manufacturing,'' said Frank Vargo, vice president for international trade at the National Association of Manufacturers. ``That's a lot of Americans to be put out of work by...an overvalued dollar.''
Separately, a group of 17 U.S. lawmakers complained in a letter to Treasury Secretary Paul O'Neill that Japan was deliberately manipulating its yen currency's value lower, and in the process hurting the U.S. auto industry.
U.S. exports totaled $77.97 billion, down about $100 million from the previous month. Manufacturers believe the dollar has been kept high by the perceptions among currency traders that the U.S. Treasury will act to keep the dollar from falling or tolerate other countries taking similar action.
``What's needed is a clear statement...Treasury believes the dollar should reflect economic fundamentals'' and that it will not intervene to protect the currency, Vargo said.
While imports have rebounded slightly after slipping from the September 2000 peak of $125.66 billion, exports have fallen steadily from the August 2000 high of $91.82 billion.
U.S. exports to Japan, which remains mired in its third recession in a decade, were $3.92 billion in January, the lowest in eight years.
The story was similar elsewhere, with U.S. exports to the European Union the lowest since July 1999 and exports to South and Central America the lowest since January 1996.
Kathleen Cooper, Commerce under secretary for economic affairs, told reporters she expected U.S. exports to pick up in the months ahead as foreign economies start to improve.
``In the next few months I think some of these other regions around the world -- Europe, Latin America, Japan -- will start to perform better economically and start to demand some of our goods,'' Cooper said.
On the import side, increased purchases of consumers goods like pharmaceuticals, electronics, toys and apparel accounted for half of the month-to-month rise, while purchases of computers accessories, industrial machines and other capital goods also were higher.
``Clearly U.S. imports increased, showing a rebound in the U.S. economy,'' said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis.
Businesses which sold off their inventories in the second half of 2001 are now turning to imports to replenish some of those supplies, Sohn said.
But at the same time, renewed growth in the U.S. trade deficit puts a lid on economic growth, as imports replaced goods that would otherwise be produced domestically, he said.
``It think we are just seeing the tip of the iceberg in terms of higher trade deficits,'' Sohn said. ``I would expect a substantial deterioration in future deficits, which would lead to somewhat slower economic growth.''