Trade Deficit Swells to $32 Billion in 4th Quarter

The U.S. trade deficit worsened in the final three months of the year, climbing to $32 billion, as U.S. exports and imports hit record levels, the government reported Tuesday.

The Commerce Department said the deficit from October through December swelled 10% from a third-quarter deficit of $29.17 billion.

The trade deficit had shown steady improvement through the first three quarters of 1988, helping to push the deficit for the entire year down to $126.5 billion, 21.7% below the all-time high of $160.28 billion set in 1987.

Although economists were pleased with the big improvement for the year, they expressed fears that the improvement has stalled and will hold back overall economic growth in 1989.

“The trade deficit has stopped improving,” said David Wyss, an economist with Data Resources Inc. of Lexington, Mass. “We made some big gains in exports in 1987 and 1988, but they haven’t been enough to balance our big appetite for imports.”

Tuesday’s figures confirmed an improvement noted in the Commerce Department’s monthly merchandise trade reports. Those figures showed the deficit declining to $137.34 billion in 1988, down from $170.3 billion in 1987.

The new report, which measures trade on a balance-of-payments basis, has smaller figures because it subtracts shipping costs and military sales.

Another measure of trade, contained in the report on the gross national product released Tuesday, also showed a worsening in the deficit for fourth quarter 1988. Unlike the other trade figures, the GNP report removes the effects of inflation from the import and export numbers.