The broadest measure of the US' trade and investment flows rose to a record high of US$164.7 billion in the third quarter, the Commerce Department said on Thursday.
With no relief in sight, some of the US' closest allies are pressing the administration to take serious steps to reign in the trade and budget deficits that are propelling a decline in the dollar. The fall of the dollar, in turn, is hurting other countries' economies.
Economists hope that the declining value of the dollar will improve the trade imbalance. But so far, the trade deficit has only deepened, with the US' imports exceeding its exports by 54 percent in the third quarter.
Based on the first three quarters, the US is adding to its debt at a record annual rate of US$665 billion, or US$5,500 for every household in the country, according to a new report by Josh Bivens, an economist at the Economic Policy Institute, a research group.
The report could have been worse. Many economists predicted that the third-quarter deficit could have been as much as US$171 billion.
The lower figure in the report prompted a rally by the US dollar in currency markets on Thursday. But economists said this would have no effect on the overall economic forecasts that predict that the US' current accounts deficit will rise about US$100 billion a year for the indefinite future.
"There is a lag effect in the drop in the value of the dollar, so I expect the US exports will be less expensive soon," said Claude Barfield, an economist at the American Enterprise Institute, a research group. "But people are skeptical about the president's record to bring about the longer range turnaround of decreasing the federal deficit."
The one bright spot in the report was an increase of US$9.6 billion in net foreign direct investment flows into this country, a "big and welcome swing" after a decrease of US$22.7 billion in the second quarter, said Ian Shepherdson, chief US economist at High Frequency Economics, a research group in Valhalla, New York.
US allies expressed their growing frustration this week that the US' economic problems were dragging down their own economies. Canada, Japan and the Europeans warned that the inability of the US to stabilize its trade deficits and halt the dollar's slide threatened not only their economic well-being but the global economy as well.
Italy's Prime Minister Silvio Berlusconi, one of US President George W. Bush's closest European allies, raised the issue with Bush in a White House visit on Wednesday. Bush said that he understood the seriousness of the currency issue for the Europeans and said that he would work with Congress to cut what he called the short-term budget deficit and push his plan to change Social Security.
The trade deficit, Bush said, is "easy to resolve."
"People can buy more United States products if they're worried about the trade deficit," he said.
Economists had hoped that a falling dollar would strengthen exports and at least stabilize the trade deficit. But the imbalance has continued to grow, with US consumers buying exports from Europe and Asia, feeding those economies, while European and Asian banks are underwriting US debt.
Japan and Europe could help by stimulating their economies to grow faster and buy more US imports, as Bush said.
But the biggest foreign stumbling block is China, which has continued to peg its currency to the dollar, letting the pain of the dollar's decline fall hardest on the Europeans and Canadians. China, one of the world's most competitive economies, has become even more competitive by refusing to revalue its currency or let it float.