Trade Deficit Much Worse in 1st Quarter

The deficit in the broadest measure of U.S. trade worsened dramatically in the first three months of the year, widening to $30.69 billion, the government reported today.

The Commerce Department said the deficit in the current account was 7% larger than the $28.68-billion imbalance run up in the final three months of 1988.

The current account, also known as the balance of payments, is the most important trade statistic because it measures not only trade in merchandise but also transactions in services, primarily investment flows between countries.

The merchandise trade deficit improved sharply in the first quarter, narrowing 13.7% to $27.63 billion. However, this improvement was wiped out by a decline in the services category, which fell to a tiny $369-million surplus from a surplus of $8.36 billion in the fourth quarter of 1988.

Analysts said the steep drop in the services surplus reflected the fact that the dollar rose in the first quarter, lowering American businesses’ earnings overseas.

The current account provides a measure of the amount of money this country must raise abroad to finance its economy. The United States, because of huge merchandise trade deficits, was transformed from the world’s largest creditor nation to the largest debtor country during the 1980s.