US deficit reaches new high as imports keep rising

Roaring demand and the high oil price took the US trade deficit to yet another record in February, new figures yesterday showed.

Roaring demand and the high oil price took the US trade deficit to yet another record in February, new figures yesterday showed.

There were some early signs that America's trade performance may be stabilising as US growth slows and expansion takes hold elsewhere. But the huge shortfall between exports and imports remains a source of concern to policy makers in Washington and elsewhere.

Economists predict that the deficit could climb as high as $400bn in 2001, having more than doubled in the past year, even if growth cools down.

William Daley, the US Commerce Secretary, said: "The US trade deficit is very high and is likely to remain so in coming months as our economy continues to outperform the economies of our major trading partners." He added that the deficit was still sustainable.

The latest figures showed a record imbalance of $29.2bn in February, up 6.5 per cent from January's $27.4bn, according to the Department of Commerce.

Exports remained roughly static, while imports surged. The shift was concentrated in trade in goods, while America's services surplus remained unchanged. The deficit with Japan and Mexico rose, but the deficits with China, Western Europe and Canada declined. There was a decrease in capital goods exports, partly due to a strike at aircraft maker Boeing.

On the import side, the increase reflected a big surge in imports of crude petroleum to a record $6.5bn primarily because of higher prices. In other categories - cars and consumer goods - imports declined, a hint that domestic demand may be slowing.

US investors are looking for signs about the next move by the US Federal Reserve, which meets again to consider interest rates on 16 May. Recent inflation figures have tended to reinforce the idea that the Fed will raise rate for the sixth time since last June, perhaps by half a percentage point, but there is still considerable uncertainty.

The dollar fell initially, although it later marked a new record high of 93.76 cents against the beleaguered euro.