Trade Deficit Widens To $48.8 Billion In December

Published February 10, 2012 2:36PM (EST)

WASHINGTON (AP) — Monthly U.S. exports to Europe grew in December, a hopeful sign after a steep decline the previous month. But, some economists remain concerned that the region's debt crisis will still weigh on the U.S. economy this year.

The Commerce Department said Friday that the overall trade deficit widened to $48.8 billion in December because imports grew at a faster pace than exports. It was the largest imbalance since June.

Imports rose 1.3 percent, largely because the U.S. bought more foreign autos, auto parts and industrial machinery.

Exports increased 0.7 percent. And exports to Europe rose 7.2 percent. That followed November's decline of more than 6 percent.

Still, exports to the 17 nations that use the euro grew just 1.7 percent in December from November. And exports to the euro zone fell 1.6 percent in December from the same month in 2010.

Europe consumes nearly one-fifth of America's exports. Some economists fear the continent may already be in a recession.

"With the danger that the euro-zone enters a deep recession still very real, weaker demand from Europe will weigh on US export growth both this year and next," said Paul Dales, senior U.S. economist with Capital Economics.

For the 2011, the deficit climbed to $588 billion, the highest level since 2008. Both exports and imports rose to all-time highs.

Economic growth weakens when exports decline because factories tend to produce fewer goods. And U.S. companies earn less.

The economy grew at an annual rate of 2.8 percent in the final three months of 2011. For 2011, it expanded by just 1.7 percent, roughly half the rate in 2010.

For 2012, economists at JPMorgan Chase forecast economic growth of around 2.3 percent. Trade is expected to be neutral as solid growth in exports is expected to be roughly offset by growth in imports.

However, that forecast could prove too optimistic if the slowdown in Europe worsens, given that this region is a top market for U.S. exports.

For the year, the deficit with China climbed to an all-time high of $295.5 billion, up 8.2 percent from the previous record set in 2010. Both imbalances were the largest ever recorded with a single country. Those deficits, coming at a time of high unemployment, have triggered calls in Congress for a crack-down on what critics see as unfair Chinese trade practices such as the country's undervalued currency.

By Salon Staff

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