Record Current Account...

Discussion in 'Politics & Religion' started by Ivanovich, Mar 14, 2006.

  1. This shit is getting out of hand.

    WASHINGTON (AP) -- America's deficit in the broadest measure of international trade surged to an all-time high of $804.9 billion last year as the country went deeper into debt to foreigners.
    The Commerce Department said the deficit in the current account was up 20.4 percent from the previous record of $668.1 billion set in 2004. The current account is the best measure of trade because it tracks not only goods and services but also investment flows between countries.


    In other economic news, retail sales for February fell by 1.3 percent, the biggest setback in six months. There were big declines in sales of autos, clothing and furniture as cold weather during the month kept shoppers away from the stores.

    In January, retail sales had surged by 2.9 percent, the biggest monthly increase in more than four years, as the warmest January in more than a century lured shoppers to the malls. Analysts had expected a drop in February activity due to colder weather although the decline was bigger than the 0.9 percent decrease they had expected.

    Analysts, however, discounted much of the February decline, saying it simply reflected a payback from the January jump in sales.

    "A big headline drop was always in the cards after the weather-assisted surge in January, which hugely boosted retail activity," said Ian Shepherdson, chief U.S. economist at High Frequency Economics, a private consulting firm.

    In a third report, the Commerce Department said that businesses increased inventories held on shelves and backlots by 0.4 percent in January, just half the 0.8 percent December gain. The inventory increase came as sales during the month by retailers, wholesalers and manufacturers rose by a solid 1.3 percent following a gain of 1.4 percent in December.

    The 2005 current account trade deficit was a record not only in dollar terms but also as a percentage of the total economy at 6.4 percent of total economic output, up from 5.7 percent in 2004. The deficit for just the fourth quarter was also a record at $224.9 billion, up by 21.3 percent from the third quarter, reflecting a big rise in the country's foreign oil bill.

    The unprecedented flow of American assets into foreign hands has raised economic anxieties that the United States is opening itself up too much to the rest of the world. Those concerns were evident in the uproar over the purchase of operations at six major U.S. ports by a company owned by the government of the United Arab Emirates.

    The political fallout from that sale became severe as politicians worried about the national security implications of having an Arab country running U.S. port operations. DP World eventually announced that it would sell off its holdings at the six U.S. ports to an American company.

    So far, foreigners have been happy to sell Americans their crude oil, cars and computers and take U.S. dollars in payments. But economists worry that the trade deficit has grown so large that foreigners may balk at holding so much of their investments in U.S. assets such as stocks and bonds.

    If they began dumping their U.S. assets, it could send the value of U.S. stocks and bonds plunging, pushing up American interest rates and weakening the value of the dollar. If the disruptions were severe enough, it could push the country into a recession.

    Former Federal Reserve Chairman Alan Greenspan said last year that the growth of the current account was unsustainable, but he predicted that market forces would drive an adjustment to a smaller deficit without serious disruption to the U.S. economy.

    For 2005, the $804.9 billion deficit reflected a huge jump in the deficit in goods to $781.6 billion, compared to $665.4 billion in 2004. America's surplus in services such as banking, insurance and tourism increased to $58 billion, up from $47.8 billion in 2004.

    However, the surplus in investments shrank to $1.6 billion last year, down from $30.4 billion in 2004. Economists said this surplus will eventually disappear altogether, reflecting the fact that the country is now the world's largest net debtor nation with foreigners owning more in U.S. assets than Americans own in foreign assets.

    The deficit in unilateral transfers, the category that includes foreign aid, rose to $82.9 billion last year from $80.9 billion in 2004.

    The retail sales report showed that demand for autos dropped a sharp 4.6 percent in February, the biggest one-month decline since an 11.7 percent fall last August.

    Excluding autos, retail sales fell 0.4 percent in February, the biggest drop in the non-auto category since April 2004.

    Sales at clothing stores were down 3.3 percent with furniture and appliance stores also posting big declines.