The latest snapshot of trade activity released by the Commerce Department on Friday showed that the "current account" deficit last year was 12.7 percent bigger than the previous all-time high deficit of $480.9 billion in 2002.
In a second report from the department, businesses -- keeping a close eye on the economic recovery -- boosted stockpiles of supplies in January by 0.1 percent. Businesses' sales, meanwhile, went up by 0.4 percent.
The increase in inventories in January wasn't as large as the 0.3 percent rise some economists were calling for. While businesses' feelings about the economy have improved in recent months, they are still cautious, especially when it comes to hiring, economists say.
On the trade front, the current account report is considered the best measure of a country's international economic standing because it tracks not just the goods and services reflected in the government's monthly trade reports but also investment flows between countries and unilateral transfers, including U.S. foreign aid payments.
"This is a difficult situation. Exports will have to grow about roughly twice as fast as imports just to keep the deficit constant," said Clifford Waldman, economist at the Manufacturers Alliance/MAPI, a research group. "The message here is that it is going to take a lot more than just strong dollar depreciation to turn the deficit around," he said. A weaker dollar makes U.S. goods less expensive for foreigners to buy.
The Bush administration says the best way to handle the mushrooming deficits is to get other countries to remove trade barriers and open their markets to U.S. companies. But Democrats and other critics point to the deficits as evidence that the president's free-trade policies aren't working and are contributing to the loss of U.S. jobs.
President George W. Bush in speeches this week promoted his free-trade policies and spoke out against economic isolationism -- a swipe at presumptive Democratic presidential nominee John Kerry, though Bush didn't mention him by name.
Kerry, a Massachusetts senator, has said he would place all trade deals under a 120-day review and would require companies to provide notice before moving jobs to other countries.
Since Bush took office in January 2001, the economy has lost 2.2 million jobs. That's something that Kerry and other Democrats have made a point of emphasizing, and they hope voters will think twice about re-electing Bush when they go to the polls in the fall.
Striking a note of optimism, Federal Reserve Chairman Alan Greenspan, in an appearance on Capitol Hill Thursday, said he believed "employment will begin to increase more quickly before long" as economic output continues to expand. Job losses have heightened fears that U.S. workers are losing out to foreign competition and this has led to proposals to erect protectionist trade barriers, Greenspan said. The Fed chief warned that a "new round of protectionist steps" represented "alleged cures" that he said "would make matters worse rather than better."
In the current account report, the United States' deficit in goods was the main factor in the bigger overall deficit for 2003. The deficit in goods widened last year to $549.4 billion, from $482.9 billion in 2002.
In the services category, the United States is running a surplus. However, the surplus in services narrowed in 2003 to $59.2 billion, compared with $64.8 billion in 2002.
Investment earnings shifted to a surplus of $16.6 billion in 2003, from a deficit of $4 billion in 2002. The deficit in the category of unilateral transfers, which includes payments that the United States makes in foreign aid to other countries, widened to $68.3 billion last year, from $58.9 billion in 2002.