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| Commentary on the December 2001 Trade Figures |
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Thursday, March 7th, 2002
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Last spring I predicted that the goods and services trade deficit for 2001 would total $350 billion. With the release of the trade figures for December 2001, it is time for a reckoning. In the event the deficit for the year totaled $346.3 billion.
Although that is $3.7 billion less than my prediction (and $29.4 billion less than the $375.7 billion deficit recorded in 2000), this is a bad result indeed for the United States. In fact, when all the adjustments are done, it indicates that America�s underlying trade problems are considerably worse than even I a year ago believed.
Remember for a start that in a recession year, the trade deficit is supposed to contract substantially as imports fall disproportionately because of weak domestic demand. A year ago we all knew the economy was struggling and I therefore, of course, factored a considerable fall in demand into my calculations. But with consumer and business confidence suffering an extraordinary blow in the wake of the September 11 atrocities, the economic downturn turned out to be considerably worse than almost anyone a year ago had expected. Thus given the depth of the economic decline in the latter half of the year, it would have been reasonable to expect a considerably larger import decline than we actually saw.
Moreover, accounting adjustments stemming from receipts of compensation from foreign insurers in respect of the September 11 atrocities provided a highly artificial boost to America�s net service receipts in September. Absent this factor, the outturn for 2001 would have been $11 billion higher than the figure announced last week.
So what is the outlook for the deficit in 2002? As I have indicated at the top of this page, I am predicting a deficit of $380 billion for this year. This figure not only represents an increase of nearly 10 percent on 2001 but implies that the 2002 total will surpass the lamentable all-time record set in 2000. This forecast is keyed to the view, widely shared on Wall Street as of this writing, that a slow recovery in domestic demand has already begun. Assuming a strong recovery, this prediction may well prove to have erred considerably on the low side.
Attached is an official commentary that accompanied the announcement of the December figures.
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U.S. International Trade in Goods and Services Highlights � December 2001
February 21 , 2002
Goods and Services Deficit Decreases in 2001
The Nation's international deficit in goods and services decreased to $346.3 billion in 2001, from $375.7 billion in 2000.
For December, the goods and services deficit decreased to $25.3 billion from $28.5 billion (revised) in November. Exports increased $0.1 billion from November to $77.9 billion in December. Goods were $54.9 billion in December, down from $56.0 billion in November, and services were $22.9 billion in December, up from $21.7 billion in November. Imports decreased $3.1 billion from November to $103.2 billion in December. Goods were $86.3 billion in December, down from $90.3 billion in November, and services were $16.9 billion in December, up from $16.0 billion in November.
Goods and Services
* The goods and services deficit in 2001 was $346.3 billion, or 3.4 percent of Gross Domestic Product (GDP). In 2000, the deficit was 3.8 percent of GDP, the highest percentage on record.
* Exports decreased $62.0 billion in 2001 to $1,003.7 billion. Goods were $720.8 billion and services were $282.9 billion.
* Imports decreased $91.4 billion in 2001 to $1,350.0 billion. Goods were $1,147.4 billion and services were $202.6 billion.
* For goods, the deficit was $426.6 billion in 2001, the second highest on record. For services, the surplus was $80.3 billion in 2001.
Goods by Category
* For 2001, the largest decreases in exports were in capital goods ($34.8 billion, primarily semiconductors, computer accessories, and electric apparatus); industrial supplies and materials ($11.6 billion); and automotive vehicles, parts, and engines ($5.6 billion).
* For 2001, the largest decreases in imports were in capital goods ($48.9 billion, primarily semiconductors and computer accessories); industrial supplies and materials ($23.8 billion); and automotive vehicles, parts, and engines ($6.2 billion).
Goods by Geographic Area (Not Seasonally Adjusted)
* The goods deficit with China decreased from $83.8 billion in 2000 to $83.0 billion in 2001. Exports increased $3.0 billion (primarily transport equipment, telecommunications equipment, and electrical machinery) to $19.2 billion, while imports increased $2.3 billion (primarily footwear, furniture and bedding, and manufactures of metal) to $102.3 billion.
* The goods deficit with Japan decreased from $81.6 billion in 2000 to $69.0 billion in 2001. Exports decreased $7.3 billion (primarily electrical machinery, computers and computer products, and tobacco and tobacco products) to $57.6 billion, while imports decreased $19.9 billion (primarily electrical machinery, computers and computer products, telecommunications equipment, and automobiles and automobile parts) to $126.6 billion.
* The good deficit with Canada increased from $51.9 billion in 2000 to $53.3 billion in 2001. Exports decreased $15.2 billion (primarily electrical machinery and automobiles and automobile parts) to $163.7 billion, while imports decreased $13.9 billion (primarily telecommunications equipment, automobiles and automobile parts, and petroleum and petroleum products) to $217.0 billion.
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Contact Eamonn Fingleton |
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