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Thursday, 15 March, 2001, 15:18 GMT
US trade gap hits record
Cargo ship
US consumers have powered the global economy
US exports rose quickly last year, but imports rose even faster, pushing the country's current account deficit to a record high.

The news could worry financial and currency markets already rattled by signs of economic troubles in Japan.

US current account deficit
Q4: $115.27bn
Q3: $113.11bn

2000: $435.38bn
1999: $331.48bn

Source:
US Commerce Department
The deficit is an indication that, on the whole, the American people are spending beyond their means.

That is, the US is buying more than it is selling, a fact that is making economists worried. Imports of consumer goods and oil accounted for much of the imbalance.

The deficit in the final three months of 2000 reached its highest level since records began more than 50 years ago.

The full-year figure also rose to a new record level, up more than 30% on 1999.

The current account deficit widened to $115.27bn from $113.11bn in the third quarter.

For 2000 as a whole, the deficit widened to $435.38bn, up from 1999's deficit of $331.48bn.

So far, that gap has been financed by capital flows into the US, as many foreign investors scrambled to buy US shares during the bull market.

But now, the fall in the stock market has led investors to flee the US, with the net flow of earnings to foreigners decreasing by 50% compared to 1999.

Engine for growth

During the last five years, the booming US economy has acted as a magnet for exporters in other countries.

Shopping mall
Shoppers buying so-called consumer goods contributed to the widening of the deficit.
The American people's spending on foreign goods and services has acted as an engine for growth in the world economy.

But with the economic slowdown in the US, the country's trade deficit is expected to shrink and exporters around the world can no longer rely on their American customers for the health of their businesses, said economists.

And with Japan also in recession, the rest of the world may find it difficult to grow as fast this year.

The current account measures not only trade in goods and services, but also investment flows and other transfers such as foreign aid payments to poor countries.

This is why it is seen as the broadest measure of US trade.

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