Export Boom Shrinks Trade Gap in Final Quarter of ’87

The nation’s record trade deficit began to shrink in the final three months of 1987 as U.S. exports climbed 6% to record levels, the Commerce Department said Wednesday.

While narrowing just $200 million from the summer, the decline of the trade deficit to $40.2 billion on a balance-of-payments basis marked the first quarterly improvement since the spring of 1986.

“We have a genuine export boom going on and I think a lot of people are pleasantly surprised,” said Robert Ortner, undersecretary of commerce for economic affairs.

Record Deficit

Ortner said further improvements were likely in the months ahead at present levels of the dollar, which he said appears to have stabilized in foreign exchange markets.

Still, the year finished with a record $159.3-billion balance-of-payments trade deficit for all of 1987, the report said.

In terms of volume alone, the trade deficit actually showed a 5% improvement in 1987 from 1986. The fact that import prices rose more rapidly than export prices helped mask this improvement, Commerce Department analysts said.

The new figures confirmed an end-of-year narrowing of the trade shortfall that already had shown up in the department’s monthly merchandise trade reports. The earlier figures showed a $43-billion deficit for the fourth quarter and a $171.2-billion shortfall for all of 1987.

Figures Revised

Wednesday’s figures were smaller because they subtracted factors such as the cost of shipping, insurance and military sales from the monthly numbers. The balance-of-payments deficit is also adjusted for seasonal variations; the monthly figures are not.

The October-December deficit was down from the $40.4-billion deficit sustained in the third quarter. That figure was revised upward from the $38.9 billion originally reported.

Exports, buoyed by a weakening exchange value of the dollar, increased $3.9 billion, or 6%, to a record $69.1 billion.

Imports also rose to a record $109.2 billion in the fourth quarter, but the increase of 4%, or $3.8 billion, was smaller than that for exports.

The report was cited by analysts as further evidence that exchange-rate changes since 1985 finally are helping to trim the trade deficit.

The dollar is worth just 50% of its mid-l985 value against the Japanese yen and key European currencies, a devaluation that is making imports more expensive to U.S. consumers while making American goods cheaper and more competitive abroad.

“The trend has changed. Exports will continue to grow and I think you will see a major decline in imports in the first, second and third quarters of this year. The biggest surprise of 1988 will be the narrowing of the trade deficit,” said Jay Goldinger, chief economist for Capital Insight, a Los Angeles bond brokerage house.

Down $2 Billion

During the fourth quarter, the trade deficit with Japan increased $1.3 billion to $15 billion; the deficit with Western Europe was up $1.5 billion to $8.2 billion, and the shortfall with Canada rose $100 million to $1.8 billion.

In the same period, the deficit with the newly industrialized countries in the Far East--Taiwan, South Korea, Hong Kong and Singapore--fell $2 billion to $8.1 billion.

Non-petroleum imports increased $5.3 billion, or 6%, to $98.1 billion in the fourth quarter. Passenger cars from Canada were up 52%, a $1-billion increase. Auto imports from all other countries, including Japan, fell by 7%, or $700 million.

Petroleum imports decreased $1.5 billion, or 12%, to $11.1 billion. Both prices and volume were down.

On exports, non-agricultural shipments of U.S. products increased $4.5 billion, or 8%, to $61.3 billion. Among the largest increases were machinery, up $2.1 billion or 12%, and automotive products to Canada, up $1 billion or 21%.