US trade deficit increases to record high in first quarter 2005

Friday, June 17, 2005

The United States trade deficit increased to its highest level yet: $195.1 billion (£161 billion) in the first quarter of 2005, according to preliminary U.S. Commerce Department figures. The figure represents the sum of money flowing into the United States by selling exports subtracted from the amount of money leaving the United States from import purchases. The last quarter of 2004 saw a deficit of $188.4 billion.

The new record-breaking deficit represents 6.4 percent of the US’s gross national product, again an increase on last-quarter 2004 – up 0.1 percent. The deficit on goods increased from $182.2 billion to $186.3 billion, as imports of goods increased more than exports, particularly in industrial supplies and materials, capital goods, and consumer products. It is believed that China‘s economic boom, and the increase in imports from the country, is partly responsible.

Analysts expressed concern at the findings, with Allan Seychuk, an economist at RBC Capital Markets, saying “This is not the direction markets were hoping to see for the mammoth current account deficit. The U.S. dollar has lost a great deal of ground because markets are uncomfortable with a deficit that has now reached record levels.”

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