A steady decline in imports to the United States, revealed in trade figures published by the US Commerce Department, could have a depressing effect on the Irish economy, which in recent years has come increasingly to depend on exports to North America.
The US trade deficit shrank to a 16-month low as American consumers cut back on purchases of items such as foreign electronics, toys and clothes. At the same time US Treasury Secretary Paul O'Neill and Commerce Secretary Don Evans both expressed optimism yesterday about a return to strong US growth in the forseeable future.
Irish exports to the US and Canada comprised 20.4 per cent of total exports in 2000, compared to 19.2 per cent to the UK and 40.1 per cent to other EU countries. Exports currently account for more than 75 per cent of Irish GDP.
The Commerce Department reported that total US imports, which have driven the global economy in recent years, declined in May by $2.86 billion (#3.28 billion) or 2.4 per cent to $116 billion. This followed a 2 per cent drop in April. Defying the strong dollar exports rose 1 per cent or $800 million to $87.73 billion, after falling 2 per cent the previous month.
Many of the most important US companies with investments in Ireland and which contribute substantially to exports have been hit by the US slowdown, with companies like Intel, Nortel, Motorola, Xerox and Gateway cutting jobs and slowing expansion.
The narrowing US trade deficit also underlines how the US slowdown is spreading to Europe and other areas of the world, with the fall in business spending hitting foreign more than US manufacturers. The sharpest decline in exports to the US is likely to occur in Ireland, France, Germany and Latin America, analysts predict.
"Slower growth in the US has reduced our demand for foreign goods and services," said Mr Evans. "At the same time, however, slower growth in many foreign economies has decreased the demand for our exports."
GDP in Canada, the largest US trading partner, dropped from 5 to 2.5 per cent in the first quarter of 2000, while Mexico's growth fell from 8 to 2 per cent, he said. "Many Asian economies, including Japan, are flirting with recessions. Elsewhere around the world, China's growth remains strong; European growth continues, albeit more modestly; and growth in South America is deteriorating."
"I am optimistic about our nation's economic future, and today's economic news is consistent with that," Mr Evans said. "Today's data, along with other recent economic indicators, show our nation has a lot of room to grow, particularly in the global marketplace, and President Bush has a solid agenda to nurture that growth."
The US Treasury Secretary predicted that the worst was now over for the struggling US economy. "We are doing well and our economy is going to come back," Mr O'Neill told NBC television.
His comments were in sharp contrast to the testimony of US Federal Reserve chairman Alan Greenspan on Wednesday that the American economy was still deteriorating.
On Wall Street stocks fell on news of software giant Microsoft's warning of slower growth.
