Trade Deficit Improves 5.4% in Latest Quarter

A drop in oil prices and higher costs for U.S. farm products helped provide a 5.4% improvement in the nation’s trade deficit from July through September, the third consecutive quarterly decline this year, the government reported Monday.

The Commerce Department said the imbalance between what America imports and what it sells abroad narrowed to $28.53 billion in the third quarter, the best showing in 3 1/2 years.

The deficit had fallen by 14.6% in the first quarter and declined another 14.3% in the second quarter to a revised $30.15 billion. Through the first nine months of the year, the deficit is running at an annual rate of $125.2 billion, compared to last year’s record $160.3 billion deficit.

Analysts predicted that the deficit for all of 1988 should be at least 20% lower than 1987, marking the first time since President Reagan took office in 1981 that the trade deficit has shown improvement.

That gain has contributed significantly to the economy’s momentum, providing almost half of total growth this year. But many analysts believe that the rapid trade improvement will slow in 1989 and as a result they are looking for a much more sluggish economy next year.

“The trade deficit has definitely turned around, but we think this is the end of it for awhile,” said David Wyss, chief financial economist of Data Resources Inc., a Lexington, Mass., consulting firm.

The trade figures Monday confirmed an improvement already evident in the Commerce Department’s monthly merchandise trade reports. Those figures showed the deficit declining by 3.2% to $32.2 billion in the third quarter, compared to $33.2 billion in the second quarter.

The new report, which measures merchandise trade on a balance of payments basis, shows smaller figures because it subtracts shipping costs and military sales from the monthly numbers.

Exports climbed to a record $82.3 billion in the third quarter, a 3.4% increase and the seventh consecutive quarter in which U.S. sales to foreigners have risen, the government reported. Imports also rose, but by a smaller 0.9% to $110.8 billion as a drop in oil shipments helped offset a rise in non-petroleum imports.

The record level of U.S. exports reflected a 7.7% jump in farm sales, which climbed to $10.4 billion.