Monday, June 14, 2004

Rise in Trade Deficit Sign of a Blossoming Economy - Mostly

With a million new jobs and people spending like mad for the past few months, it is no surprise that Americans are buying more imported goods today. Our hunger for electronics, automobiles and other imported goods is greater than the amount of goods we are exporting. Combine that spending with our oil consumption, at higher prices right now,and the result is a trade deficit.

The deficit grew 3.8 percent over April - with a record high of $48.3 billion. When you take out imports of oil and automobiles, it was only 0.3 percent higher.

"In and of itself, a trade deficit says very little about the economy," PPI analyst Jenny Bates wrote in a recent report. What matters more is how the U.S. economy puts the capital it is "borrowing" from other countries to use. If it is used to boost U.S. productivity, such deficits can be a positive in the long run, she added.

Others say the growing gap reflects the fact that less U.S.-made goods are being sold overseas, which in the long run is bad news for American workers.


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