Re: A positive thought about President Hillary
Tue Mar 14, 4:51 PM ET<br /> <br />WASHINGTON (AFP) - The US current account deficit widened to a colossal new high of 804.9 billion dollars in 2005 as consumers binged on cheap imported goods, the government said. <br /><br />Huge gaps in oil and goods trade pushed the broadest measure of commercial and capital flows up from the 2004 deficit of 668.1 billion dollars, amounting to a record 6.4 percent of gross domestic product last year.<br /><br />The Commerce Department said that in the fourth quarter of 2005, the current account deficit surged by 21.3 percent from the previous three months to a record 224.9 billion dollars.<br /><br />That amounted to an unprecedented 7.0 percent of GDP. Economists were expecting a deficit of 218.0 billion dollars for the quarter.<br /><br />The deficit had fallen in the third quarter as foreign insurance companies paid out for claims arising from hurricanes Katrina and Rita, which devastated parts of the southern United States in late August and September.<br /><br />The country did enjoy surpluses on its overseas financial and corporate investments last year. But those were not nearly enough to overcome a tidal wave of imported goods, not least from China, and a swollen petroleum bill.<br /><br />The current account figures confirm a dismal picture painted by the trade deficit, which according to figures out last week expanded in January to an all-time high of 68.5 billion dollars.<br /><br />The deficit is equivalent to a huge debt owed by the United States to the rest of the world. So far, it has financed its current account gap on favourable terms thanks to foreign demand for US securities.<br /><br />That has allowed US interest rates to remain low, fuelling consumer spending and a property market boom.<br /><br />But analysts are worried that foreign investors, including big holders of US government debt like China and Japan, will tire of financing the US deficit if they fear lower returns in future.<br /><br />That prospect hit the dollar after the current account data came out, with the greenback falling under 1.20 to the euro in New York currency trading.<br /><br />Kathy Lien, chief fundamental analyst at Forex Capital Markets, said the data confirmed "clear structural deficiencies" that could undermine the US currency.<br /><br />Rising imports, by subtracting from GDP growth, could hurt US economic performance in the coming quarters, economists said.<br /><br />"This situation is likely to become worse in the months ahead," University of Maryland business professor Peter Morici said.<br /><br />"Crude oil prices are rising again, and an overvalued dollar continues to keep imported cars and consumer goods cheap. Announced production cutbacks at GM and Ford will result in more imports of motor vehicles and parts," he said.<br /><br />In 2005, the United States had a 58.0-billion-dollar surplus on trade in services and a surplus of 1.6 billion dollars on income flows, the Commerce Department said.<br /><br />But on the debit side, there was a far greater deficit of 781.6 billion dollars on trade in goods.<br /><br />More than one-third of the increase from 2004 was accounted for by higher prices for crude oil and petroleum products. Imports of industrial supplies, capital goods and consumer goods also surged. <br /><br />Income from US-owned assets abroad rose 24 percent year-on-year to 465.6 billion dollars, largely driven by interest and dividend payments. <br /><br />Net foreign purchases of US Treasury bonds rocketed 84 percent to a record 196.8 billion dollars in 2005. <br /><br />Against a trade-weighted group of seven major currencies, the US dollar depreciated two percent on a yearly average basis in 2005. But it rose seven percent year-on-year in December.
