$39.5-Billion Trade Deficit Sets Record

The nation’s trade deficit widened to $39.5 billion from April to June, the largest shortfall on record for a three-month period, the government reported today.

The Commerce Department said the increase followed a deficit of $38.8 billion, the previous record, in the January-to-March quarter.

The largest increase in imports was in passenger cars from Asia. Imports of Japanese automobiles were up 15% while imports from Korea soared 90%.

The new report confirmed parallel figures released earlier which put the first-quarter deficit at $42.71 billion. Today’s deficit figure is lower because it reflects trade on a “balance-of-payments” basis, omitting such factors as the cost of shipping and insurance and military sales.

Analysts saw the report as fresh evidence that the U.S. trade deficit is not improving, despite more than two years of declines in the value of the U.S. dollar against other key currencies.

A weaker dollar generally makes imports more expensive and U.S. goods more competitive abroad.

But despite a dollar worth only 40% to 50% of what it was worth in mid-1985, imports in the April-to-June quarter increased 4% to $99.5 billion.

The new figures also appeared to undermine contentions by some economists that imports were decreasing, in terms of volume if not in value.

In fact, for the second quarter of 1987, the volume of imports increased 2% at the same time prices increased by an identical 2%.

All non-petroleum imports increased during the period by 3% to $89.5 billion. Petroleum imports rose 15%, to $10 billion.

Exports also showed some strength in the quarter, increasing 5% during the period to $60 billion. Volume of exports increased 4%, and prices went up 1%.

Agricultural exports increased 9%, to $7.1 billion, while non-agricultural exports increased 5%, to $52.8 billion.

The deficit with Japan increased $100 million during the April-June quarter, to $14.3 billion. It was the second-biggest balance of payments deficit with Japan ever.

The deficit with Western Europe increased $1 billion to $6.9 billion.