THE ECONOMY : Trade Deficit Shrinks 13.7% in 1st Quarter

The United States enjoyed its best trading performance in four years from January through March as the deficit narrowed 13.7% to $27.63 billion, the government reported Friday.

The Commerce Department said a decline in non-oil imports and the highest level of farm exports in almost eight years helped to lower the deficit from the fourth-quarter level of $32.02 billion.

Propelled by the higher farm sales, exports jumped 5.7% in the first quarter to a new record of $88.50 billion.

Imports hit an all-time high of $116.13 billion as well, but the 0.3% increase was much smaller than the pace of export expansion.

Friday’s report on merchandise trade, as calculated on a balance-of-payments basis, confirmed an improvement already noted in the Commerce Department’s monthly merchandise trade reports.

The totals are slightly different because the new report excludes military sales by the U.S. government to foreign governments and makes other minor adjustments to the monthly figures.

Worries Over Dollar

While the Bush Administration and some analysts are looking for the first-quarter trade improvement to continue, other private economists expressed concern that the deficit will begin widening in coming months.

They are particularly worried about the strength in the dollar, which makes American products more expensive on overseas markets, and rising oil prices, which boost the country’s foreign oil bill.

Cynthia Latta, an economist with Data Resources Inc. in Lexington, Mass., predicted that the trade deficit for the entire year will be essentially unchanged from the $127.22 billion deficit in 1988.

“While agricultural sales were up sharply in the first quarter, that sector is really threatened by the strength in the dollar because there are so many other countries willing to supply the products if the American price becomes uncompetitive,” she said.

But Allen Sinai, chief economist of Boston Co., said he was more optimistic that the U.S. trade deficit would continue to narrow this year, helped out by faster growth overseas and slower U.S. growth, which would cut the demand for imports.

“So long as the economies of the world stay strong, there is every reason to believe that our exports will keep doing well,” he said.

The big jump in exports in the first quarter reflected an 11.2% surge in sales of American farm products, which climbed to $10.88 billion.