Trade Gap at a Record $44.2 Billion

The trade gap hit a new record in December while wholesale inflation surged in January, a surprisingly poor set of economic reports showed Thursday.

Separate data revealed a labor market still stuck in the doldrums, with the number of Americans lining up to claim first-time unemployment benefits jumping in the latest week.

The U.S. trade gap widened 10.6% to a record $44.2 billion in December as exports floundered and imports surged. The gap trounced expectations of a deficit of $38.8 billion.

The trade gap with Germany set a record, and the gulf with Japan was the highest since October 2000.

Imports from China, the U.S. largest import partner, surged to $125.2 billion.

“There can be no question that U.S. manufacturing trade competitiveness continues to slip,” said Jerry Jasinowski, president of the National Assn. of Manufacturers.

Economists said the trade data mean the government may revise fourth-quarter gross domestic product upward by less than expected.

According to preliminary data, the economy grew at a pace of 0.7% in the last quarter of 2002. Before the latest numbers, economists had expected the figure to be revised up next week to 1.1%.

There also was worrying news on the inflation front. The Labor Department said producer prices soared 1.6%, the biggest leap since January 1990 and far higher than the 0.5% increase expected by economists.

Much of the rise was linked to rocketing costs for gasoline and heating oil as cold weather boosted demand and uncertainty over a possible war with Iraq pushed up prices.

Excluding volatile food and energy prices, inflation still rose an unexpectedly large 0.9%. Auto costs factored into that increase, after manufacturers cut back on incentives in January.

In disappointing news on the job front, the Labor Department said initial claims for unemployment aid rose 21,000 to a seasonally adjusted 402,000 in the week ended Feb. 15.

The number was worse than the 382,000 expected by economists, many of whom view claims above the 400,000 level as a sign of a deteriorating job market.

In another report Thursday, the Conference Board said its index of leading economic indicators, after three monthly gains, edged down one-tenth of a percentage point in January. The index may suggest a slower pace of growth in coming months as the threat of war in Iraq intensifies.