Trade Deficit Figures at 3-Year Low : Merchandise, Service Sectors Credited for Improvement

The deficit in the broadest measure of U.S. trade shrank to $30.89 billion from July through September, the smallest imbalance in three years, the government reported Tuesday.

While the Reagan Administration said the decline was proof that its efforts to solve the country’s trade problems were bearing fruit, private economists expressed fears that the trade improvement was in danger of stalling next year.

The Commerce Department report said America’s deficit in its current account narrowed by 8.4% after an 8.6% drop in the second quarter, when the current account deficit was $33.7 billion.

The current account, also known as the country’s balance of payments, is the most important trade statistic because it measures not only trade in merchandise but also trade in investments and other services.

Half of the improvement in the third quarter came from a decline in the merchandise trade deficit, which dropped to $28.5 billion, reflecting a record level of U.S. export sales.

The other half of the improvement came from a swing in the services category back into surplus. Services, which primarily reflect investment flows between countries, posted a deficit of $837 million in the second quarter, the first investment deficit in 30 years.

In the third quarter, services climbed back into the black with a $757-million surplus, reflecting increased earnings by U.S. companies on their overseas operations. But economists warned that the investment category soon will sink back into deficit as America is forced to service a growing foreign debt burden.

The third-quarter deficit was the smallest imbalance since a $27.6-billion deficit in the third quarter of 1985.

For the first nine months of this year, the current account deficit has been running at an annual rate 12% below the record $153.96-billion imbalance run up in 1987.

The Reagan Administration has credited this improvement with providing the country with almost half of its overall economic growth this year, as U.S. manufacturers have hired more workers and stepped up production to meet a 27% jump in export sales.

But Jerry Jasinowski, chief economist of the National Assn. of Manufacturers, said the big export gains could be ending unless the new Administration aggressively pursues efforts to open foreign markets to U.S. goods.

“The Bush Administration is going to have to hit the ground running on trade policy,” Jasinowski said. “Unless policy-makers cooperate, we face the danger of a mid-point stall and a large trade deficit that will continue to plague us far into the next decade.”

The government is scheduled today to release its estimate of the monthly merchandise trade deficit for October. In advance of the report, David Wyss, an economist with Data Resources Inc., predicted that the October merchandise deficit would total $10.5 billion, the same as the September level.