Printer Friendly

TRADE DEFICIT SWELLS TO $48 BILLION : IMBALANCE UP 19.3% DURING 3RD QUARTER.

Byline: Martin Crutsinger Associated Press

America's trade deficit skyrocketed to a record $48 billion as demand for oil and other foreign goods continued to increase while U.S. exports fell for the first time in three years.

The imbalance in the U.S. current account ballooned by 19.3 percent during the July-September quarter, with all major categories of trade showing weakness, the Commerce Department said Tuesday.

``Right now the current account is hemorrhaging and trade is proving to be a major constraint on the U.S. economy,'' said Mark Zandi, an economist at Regional Financial Associates, a West Chester, Pa., forecasting firm.

The current account is the broadest measure of U.S. trade, covering not only exports and imports of goods, but also services such as tourism and investment flows.

Private analysts said it was particularly worrisome that growth of U.S. merchandise exports faltered in the third quarter, dipping by 2.1 percent.

It was the first quarterly setback for export growth since mid-1993. Analysts said the weakness was likely to persist into 1997, given the rising value of the dollar, which makes American goods more expensive overseas, and continued economic weakness in major U.S. markets.

However, financial markets, which have been looking for signs of a slowing economy that would keep the Federal Reserve from increasing interest rates, brushed off the widening deficit. The Dow Jones industrial average, which jumped 82 points Monday, was up another 9.31 points Tuesday to close at 6,473.25.

But private economists worried that with growth already slowing, a bigger-than-expected deterioration in trade could cause trouble down the road, especially if there is an unexpected shock.

``This drag on trade is coming at a bad time, when the economy is already slowing,'' said Lawrence Chimerine, chief economist at the Economic Strategy Institute.

The overall economy, as measured by the gross domestic product, slowed to a 2 percent growth rate in the third quarter, and many analysts believe the fourth quarter could be even weaker. Without the widening trade deficit, GDP would be a full percentage point higher now, analysts said.

Top auto executives met recently with Treasury Secretary Robert Rubin to complain about the 30 percent rise in the value of the dollar against the Japanese yen since the spring of 1995 and urged the administration to pressure the Japanese government to stop intervening in currency markets to buy dollars in an effort to keep the U.S. currency from dropping in value. A higher foreign exchange value for the dollar makes U.S. goods more expensive in overseas markets.

Rubin, however, has insisted that the administration will not switch from its policy of advocating a strong U.S. dollar. But some economists said the strong dollar's impact on trade flows was only beginning to be felt in the third-quarter figures and would make next year's deficit even worse.

David Wyss, an economist at DRI-McGraw Hill Inc., predicted that the current account deficit would set a record this year just above the old mark of $166 billion set in 1987 and would surge even higher to $201 billion in 1997. The current account deficit totaled $148.2 billion in 1995.

Republican presidential candidate Bob Dole tried to make the growing trade deficit an issue in the campaign, contending that it has cost thousands of American manufacturing jobs.

But White House press secretary Michael McCurry said Tuesday that the trade imbalance was a reflection of the strength of the U.S. economy and confident American consumers. ``They're buying, and they're buying, in many cases, from abroad,'' McCurry said.

The drop in exports and a 0.7 percent rise in imports, reflecting in part higher oil shipments, pushed the deficit in goods up 9.8 percent to $51.6 billion.

America also suffered a 7.8 percent increase in the deficit in investment earnings to $4.7 billion, reflecting big increases in payments to foreigners holding U.S. Treasury securities.

The category that includes foreign aid payments also increased in the third quarter, by 0.6 percent to a $9.42 billion deficit.

Offsetting these deficits, America as usual had a surplus in services - items such as airline tickets and royalty payments. But the $17.8 billion services surplus was down 3.5 percent from the second quarter.

The $48 billion third-quarter current account deficit was the largest in history, surpassing the old mark of $43.2 billion set in the fourth quarter of 1987.
COPYRIGHT 1996 Daily News
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1996, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:BUSINESS
Publication:Daily News (Los Angeles, CA)
Date:Dec 11, 1996
Words:744
Previous Article:LOCAL NOTES.
Next Article:LAKERS SURVIVE VAN EXEL'S LOSS : LAKERS 92, SACREMENTO 90.


Related Articles
BUSINESS NOTES VERITAS FUND BUYS BANKRUPT STELLEX.
U.S. TRADE IMBALANCE WORSENS.
DEFICIT REACHES RECORD; ASIA CRISIS BLAMED IN TRADE IMBALANCE.
IMPORTS FUEL RISE IN U.S. TRADE IMBALANCE; JAPANESE AUTOS LEAD RECORD SURGE.
U.S. TRADE DEFICIT HIT $111 BILLION, WORST IN 7 YEARS.
TRADE DEFICIT SPIKES UP : JULY SURGE BELIES CLINTON CLAIMS.
Trade between the U.S. and Mexico.
BRIEFCASE ID THEFT VICTIMS IN OHIO TO GET HELP.
China and the financing of American debt: watch the all-important commodity-producing nations.

Terms of use | Privacy policy | Copyright © 2018 Farlex, Inc. | Feedback | For webmasters