Current Account Deficit Shrinks in 4th Quarter; Import Prices Rise

The deficit in the broadest measure of trade set a record for the fifth consecutive year even though the imbalance in the final three months of 2006 shrank, reflecting a lower foreign oil bill. The government also reported prices of imported goods rose less in February than economists had predicted.

The Commerce Department reported that the imbalance in the current account jumped by 8.2% to $856.6 billion, representing a record 6.5% of the total economy. For the fourth quarter, the deficit shrank by 14.6% to $195.8 billion, the smallest quarterly imbalance since the summer of 2005.

Even with the fourth quarter improvement, administration critics say the soaring deficit for the whole year shows the failure of President Bush's trade policies to protect American workers. They contend that America is going into hock to foreigners at an alarming rate even though they have been more than willing so far to hold American assets in return for sales of televisions, cars and other goods to U.S. consumers.

U.S. import prices rose a smaller-than-expected 0.2% in February as petroleum prices gained modestly, a Labor Department report showed this morning.

Analysts polled by Reuters were expecting import prices to advance 0.8%.

Excluding volatile petroleum prices, import prices were down 0.1%. Petroleum import prices rose 2%.

January's drop in petroleum import prices was revised to a somewhat smaller decline of 5.3% from a slide of 7.3%. While petroleum import prices were up from a month ago, they were down 2.6 percent from the same time a year ago.

U.S. export prices rose a bigger-than-expected 0.7%, the sharpest climb since June, as agricultural export prices rose. Analysts had forecast a 0.2% rise in export prices.

But capital goods export prices fell 0.1%, the first decline since August.