Record Exports Narrow Trade Deficit 10%

The U.S. trade deficit narrowed a surprising 10% to $8.86 billion in March as a record level of export sales helped to offset rising oil imports, the government said today.

The Commerce Department said the improvement in the country’s trade balance came from a 7.4% rise in exports, which hit a record $30.78 billion. Imports were up as well, climbing by 3% to $39.64 billion.

The March deficit represented a 9.9% improvement from a revised February imbalance of $9.82 billion. The March deficit was the lowest since January, when the deficit fell to $8.68 billion.

For the first three months of the year, the deficit has been running at an annual rate of $109.4 billion, an improvement from last year’s deficit of $119.76 billion.

The size of the March trade improvement was a surprise to many economists. Analysts continued to insist, however, that the country’s trade performance will show little, if any, improvement for the whole year as U.S. exports fall victim to recent increases in the value of the dollar, which make American products more expensive on overseas markets.

“The deficit for this year will be about the same as last year,” predicted Michael Evans, head of a Washington forecasting firm. “I think the March number was artificially low.”

Such an outcome would represent a blow to the Bush Administration, which is counting on continued trade improvement this year to fuel overall economic growth.

Last year’s dramatic 21% drop in the trade deficit from an all-time high of $152.1 billion in 1987 accounted for almost half of all U.S. economic growth.

The Administration hailed the March trade report. Commerce Secretary Robert A. Mosbacher noted that the deficit for the first three months of this year was 10% lower than the imbalance in the final quarter of 1988.

“These numbers support our contention that a favorable movement in our exports and imports is under way,” Mosbacher said in a statement.

The trade improvement last year came from a sharp jump in export sales. The Administration is hoping to push exports even higher in 1989 by threatening to retaliate against countries that keep their markets closed to U.S. products.

The March improvement came despite the fact that the bill for foreign oil climbed to $3.69 billion, up 13.6% from the February level, reflecting higher prices.

The total oil bill was the highest since November, 1987. The $15.97 per barrel price represented the fourth consecutive monthly increase.