Prices Jump; Trade Deficit at High
By Martin Crutsinger
AP Economics Writer
Wednesday, Feb. 21, 2001; 9:28 a.m. EST
WASHINGTON –– Consumer prices shot up a
worrisome 0.6 percent in December, the biggest
increase in 10 months, as homeowners saw their natural
gas bills jump by a record amount, the Labor
Department said Wednesday.
The January rise in the closely watched Consumer Price
Index was the largest since a 0.6 percent increase in
March 2000. Last month's figure reflected a record 17.4
percent increase in the price of natural gas, a
development that has sent residential gas bills over the
$300 mark in many parts of the country.
The January increase in inflation, which followed three
straight monthly gains of a moderate 0.2 percent, was
double what private economists had been expecting.
Meanwhile, the Commerce Department said America's
trade deficit with the rest of the world rose to an
all-time high of $369.7 billion last year even though the
December deficit shrank for a third straight month.
The trade deficit for all of 2000 was 39.5 percent higher
than the previous record-holder, a deficit of $265
billion in 1999. The increase occurred even though the
deficit for December narrowed a slight 0.4 percent to
$33 billion.
In a sign of things to come, China overtook perennial
front-runner Japan as the country with the largest trade
gap with the United States.
The trade deficit has set an annual record for the past
three years as the strong U.S. economy has been a
magnet for imports while many of America's major
export markets have been struggling to recover from
currency crises in 1997 and 1998.
The acceleration in price pressures last month was led
by a 3.9 percent jump in energy prices, the worst
showing since September. Natural gas prices rose 17.4
percent from last month – the largest one-month increase
on record. Electricity prices were up 2.6 percent from
last month, the biggest one-month gain since February
1980.
Outside the volatile food and energy categories, the
"core" rate of inflation was up 0.3 percent in January,
the largest increase since November.
The 0.6 percent rise in the overall Consumer Price
Index followed an even bigger 1.1 percent surge in
wholesale prices last month, the biggest jump in more
than a decade.
Critics of U.S. trade policy see the rising trade deficits
as a major flaw in free trade that has allowed low-wage
countries to displace American manufacturing workers.
But free-trade supporters, including top economic
officials in the Bush administration, contend that
America has no option but to compete in the global
economy.
That was also the position taken by the previous Clinton
administration, which angered its labor constituency by
resisting protectionist pressures at home while pursuing
a strategy of tearing down foreign trade barriers.
American exports, propelled by strong demand for farm
products, autos and industrial materials, rose by 11.7
percent to top the $1 trillion mark for the first time at
$1.07 trillion. But imports were up an even sharper 17.8
percent to $1.44 trillion, driven in part by a rising
foreign oil bill.
The country imported a record 3.4 billion barrels of
crude oil with the average price rising to $26.41, the
highest level in 16 years, since a $27.68 average in
1984.
Among individual trading partners, America suffered the
biggest shortfall with China, a record imbalance of
$83.8 billion, 22 percent higher than in 1999.
The deficit with Japan, which for decades has been the
front-runner, also set a record at $81.3 billion, an
increase of 10.8 percent over the 1999 imbalance.
America's deficit with its biggest trading partner,
Canada, climbed to a record $50.4 billion while the
trade gap with Mexico, the other partner in NAFTA,
rose to a record $24.2 billion. The deficit with Western
Europe hit a record $59.8 billion.
For December, the $33 billion deficit compared to
$33.1 billion in November and $33.6 billion in October,
all down from the all-time monthly high of $33.8 billion
set in September. It marked the first time the trade
deficit has improved for three straight months since
mid-1995.
Food costs last month rose a more moderate 0.3 percent
after posting a 0.5 percent gain the month before.
Housing costs were up 1 percent after more moderate
increases through most of last year.
If the January rise in consumer prices continued for an
entire year, something forecasters are not expecting,
inflation for all of 2001 would be a sizable 7.8 percent.
Last year, consumer prices rose by 3.4 percent, the
biggest increase in a decade, reflecting a second year of
rising energy prices. Most analysts think inflation this
year will be better controlled.
