Thursday, November 19, 1998

Trade deficit improves in September after setting record

WASHINGTON (AP) - A blip in aircraft exports temporarily narrowed the U.S. trade deficit in September. But economists warn the gap between what the nation sells overseas and buys will continue to grow, though perhaps not as rapidly as during the peak of Asia's financial crisis.

At $14 billion, the seasonally adjusted September difference between exports and imports was 11.7 percent lower than a revised record of $15.9 billion in August, the Commerce Department said Wednesday.

However, Lee Price, the department's chief economist, warned that a huge $2 billion increase in aircraft sales abroad, which more than accounted for the deficit decrease, "is not a permanent trend."

Other analysts said the trade gap is continuing to deteriorate, though not as fast as during the first half of the year.

"The trend is still toward worse, rather than better, even if we had one month where one of our leading export industries - aircraft - did well," said economist Bill Cheney of John Hancock in Boston. "Tradable goods industries are hurting and will go on hurting for a while."

Starting last summer, currency crises leveled a number of Asian economies and then Russia's and, until last week's $42 billion international rescue of Brazil, threatened Latin America.

To protect the U.S. economy from spillover from overseas recessions, the Federal Reserve cut short-term interest rates on Tuesday for the third time in less than two months.

Nevertheless, the crises have flattened many foreigners' ability to buy U.S. factory and farm products. At the same time, devalued currencies have given some countries a competitive edge in selling goods in the United States.

Despite the improvement between August and September, the deficit for the July-September quarter rose to a record $44.5 billion.

So far this year, the deficit in goods and services is running at an annual rate of $166 billion. That's 50 percent above last year's $110 billion imbalance and puts the imbalance on track to top the previous record of $153 billion, set in 1987.

In September, U.S. exports of goods and services rose 3.3 percent to $77.1 billion. But for the first nine months of the year, they were off 0.5 percent. Imports fell 0.2 percent to $91.2 billion but were up 4.8 percent for the first nine months.

In goods alone, the U.S. trade deficit with Pacific Rim countries soared 36 percent to $119 billion from January through September, compared with the same period a year earlier.

In September, the trade deficit with China fell just $6 million short of August's $5.91 billion record. But, with Japan, it declined to $5.07 billion from $5.2 billion the month before.

The deficit with Canada, America's largest trading partner, jumped 40 percent to $2.3 billion in September, highest since December 1996. Reflecting the end of the General Motors strikes, auto imports from Canada increased by $1.1 billion.

The deficit with Mexico fell to $1.45 billion, down 18 percent from a record $1.76 billion in August.

The increase in U.S. exports overall was the second in a row and came after four consecutive declines. Exports of civilian aircraft doubled to a record $4 billion.

"This is the calm before the storm," said economist Lawrence Chimerine of the Economic Strategy Institute in Washington. "Boeing has been losing orders in the Far East. ... Today's number is not the start of a new trend."

Exports of agricultural products fell 8.6 percent to $3.3 billion, the lowest since July 1994.

Meanwhile, imports of advanced technology products, including computers, rose to a record $14 billion. But oil imports fell 10 percent to $3.6 billion.

"That's clearly an aberration. Oil consumption in the United States is clearly on the rise," said economist James Glassman of Chase Securities Inc. in New York.

It reflected a decrease in volume to 8.23 million barrels a day from 9.32 million but an increase in price to $10.98 per barrel, compared with a 12-year low of $10.63 in August.