Trade Deficit Soars; Record Year Confirmed

The broadest measure of U.S. foreign trade hit a record $34.7-billion deficit during the April-June quarter, confirming projections that the nation will have a record annual deficit this year, the Commerce Department said today.

The deficit in the country’s current account, which includes trade in merchandise and services, climbed 2% above the $34-billion total from January through March, the previous record, the department said.

One reflection of the soaring deficit--weak industrial production--continued last month, the Federal Reserve Board reported today. The Fed said production at the nation’s mines, factories and utilities rose a slight 0.1% in August, but output remained below its levels of early 1986.

Surplus in 1981

As recently as 1981, the United States enjoyed a surplus in its current account as earnings on American investments overseas, the services category, were enough to erase perennial merchandise trade deficits.

Since 1982, however, the deficits in the current account have steadily mounted and, as a result, the country has gone from being the largest creditor in the world to being a net debtor nation. Simply put, that means foreigners now own more U.S. investments than Americans hold foreign investments.

The industrial production report for August followed a much stronger gain of 0.3% in July. It also marked a substantial revision from last month, when the government had reported that industrial output had fallen 0.1% in July after declining 0.5% in May and 0.3% in June.