U.S. Boom Economy Widens Trade Deficit to $1.7 BillionBy Peter G. Gosselin
LOS ANGELES TIMES -- WASHINGTON
Exuberant Americans shopped the planet until they nearly dropped in January while much of the rest of the world kept its wallet firmly in its pocket.
The result, the government announced Thursday, was a record-breaking $17-billion U.S. trade deficit that seemed certain to fuel already simmering protectionist sentiments but was otherwise seen largely as another sign of just how well the nation’s economy is performing.
“Some people will tell you this is bad news, but there is nothing inherently wrong with a weakening trade deficit,” said Mickey D. Levy, chief economist with Bank of America Corp. in New York. “Our exports are declining because of trouble overseas and our imports are rising because of strength here.”
That may prove cold comfort for American steelworkers and others, who charge that cheap imports are threatening their jobs and who demand -- with some success -- that the government staunch the flow. The House voted overwhelmingly to limit steel imports.
But for most people, the huge influx of foreign goods and services is simply an extension of the nation’s eight years of economic happy times.
“Right now, with the economy running strong and employment high, consumers are reaping the benefits of being able to buy a wide variety of things at lower prices,” said Jeffrey J. Schott, a senior fellow at the Institute for International Economics in Washington.
Low-priced imports have contributed mightily to the consistently low inflation rate that has characterized the booming 1990s. The Labor Department reported Thursday that inflation remained in check for another month, as the consumer price index crept up a mere 0.1 percent in February despite hefty increases on such items as meat, oranges and airline tickets.
To the extent that economists worry about trade deficits, their focus is considerably different from that of politicians and factory workers. Analysts view a deficit as, in effect, a loan from the countries that sell the United States more than they buy and accumulate stockpiles of American currency.
“Like any other kind of debt, it’s not bad until you have to pay it back,” said Maureen F. Allyn, a senior economist with Zurich Kemper Investments Inc. in New York. “But you do have to pay it back.”
“It’s a little like putting on weight,” added Nicholas S. Perna, chief economist with Fleet Financial Group Inc. in Boston. “One pound in any given month doesn’t make that much difference. But when the pounds accumulate, you’ve got a problem.”
All of the January deficit and then some was accounted for by a mismatch of Americans’ buying and selling of goods.