The U.S. trade deficit continues to rack up new records, undercutting hopes for a U.S.-led recovery.

The U.S. Dept. of Commerce, reported Thursday that total December exports of US$81.2 billion and imports of US$125.4 billion resulted in a goods and services deficit of US$44.2 billion, US$4.2 billion more than the US$40 billion in November, revised.

“The main culprits in the U.S. data were a US$2.2 billion drop in exports of capital goods and increases in imports of foreign industrial supplies, capital goods and autos and parts,” says RBC. “Not much of the sharp deterioration in the U.S. trade deficit can be pinned on Canada since Canada’s trade surplus with the United States only increased by $633 million in December which is only about 7% of the rise in the U.S. trade deficit.”

CIBC World Markets says that today’s report means that for the whole of 2002, the trade deficit set a new record of US$435.2 billion, a hefty 21% rise on its year-earlier level. “Although some parts of the economy have looked a bit better of late, the trade sector is not one.”

Although Canada retains healthy trade surpluses, RBC says, “The downward spiral in the U.S. trade deficit caused by runaway domestic consumption and weakness in foreign export markets, coupled with large projected increases in the U.S. federal budget deficit, remain two very serious concerns acting against the U.S. dollar and financial markets.”

Indeed, the greenback slipped on the news.