Trade Deficit Grows; Housing Starts Climb
The U.S. current account deficit widened more than expected in the fourth quarter to a record $187.9 billion, fueling fresh worry about whether the U.S. can attract the foreign investment necessary to fund the gap.
But other reports Wednesday showed the economy growing at a strong pace in February.
For all of 2004, the current account deficit -- the broadest measure of U.S. trade with the world, which includes investment flows -- surged 25% to a new high of $665.9 billion from the 2003 gap of $530.7 billion, the Commerce Department said.
The deficit in the U.S. current account swelled by $22 billion in the fourth quarter from an upwardly revised third-quarter reading of $165.9 billion.
Separate reports showed housing starts climbing to a 21-year high in February and capacity utilization at U.S. factories, mines and utilities increasing.
The quarterly current account gap overshot Wall Street expectations for a $181.9-billion deficit. The yawning trade deficit renewed anxiety that foreigners might lose their appetite for U.S. assets, which could lead to a further decline in the dollar.
So far, net inflows of capital have offset the deficit, but economists worry that the amount of borrowing needed to finance the deficit may not be sustainable.
A second government report showed that U.S. housing starts rose 0.5% last month to a 21-year high, defying analysts’ expectations for a decline.
Housing starts climbed to a seasonally adjusted annual rate of 2.195 million units in February from an upwardly revised 2.183-million-unit pace a month earlier. The monthly rate was the highest since a 2.26-million-unit pace in February 1984.
Wall Street economists had expected housing starts to fall 5% to a 2.05-million-unit rate from the 2.159-million-unit rate initially reported for January.
Single-family housing starts rose 0.3% to a record pace of 1.775 million units. But permits for future groundbreaking, an indicator of builder confidence, slid 2.7% to a 2.074-million-unit pace.
Applications for home mortgages rose 3.2% last week as purchasing and refinancing activity rose despite sharply higher interest rates, according to a report by the Mortgage Bankers Assn.
A Federal Reserve report Wednesday showed that U.S. industrial production rose 0.3% in February. Analysts were expecting total output at factories, mines and utilities last month to rise 0.4%. But January’s output was revised upward to a 0.1% gain from an unchanged reading.
Overall, U.S. industry operated at 79.4% of capacity, up from 79.2% in January. Factory output, a subset of total production, rose 0.5% last month, and the factory operating rate was 78.5%, up from 78.2% and the highest since November 2000.
