Trade Deficit Has Dramatic Drop in June : 18.9% Decline Puts Figure at $8.17 Billion, Lowest Since 1984

The U.S. trade deficit improved dramatically in June to $8.17 billion, the smallest imbalance since December, 1984, the government said today.

The Commerce Department said the June deficit represented a sharp 18.9% improvement over a revised May deficit of $10.08 billion.

The improvement came from a 1.5% increase in U.S. exports, which pushed them to a record level of $30.91 billion, and a 3.6% drop in imports, which fell to $39.08 billion. The trade deficit is the difference between imports and exports.

The overall deficit of $8.17 billion was the lowest monthly imbalance since a $6.79-billion deficit in December, 1984. The June figure was immediately hailed as an encouraging sign by the Bush Administration.

At the vacation White House in Kennebunkport, Me., presidential press secretary Marlin Fitzwater said, “The decline was greater than market expectation and certainly is good news for the country. The continued rising trend in exports is welcome.”

Commerce Secretary Robert Mosbacher said the improvement showed “increasing expertise by American exporters” in penetrating foreign markets.

“For the first six months, exports increased 15% from a year ago, while imports rose about 8%,” Mosbacher said.

Economists had been looking for the deficit to narrow, but not by as large a margin as actually occurred. However, analysts said the figures did not change their overall prediction that the country’s trade improvement is in danger of stalling out.

Many economists are predicting that the deficits will begin rising in the second half of the year as American exports suffer from the rising value of the dollar. A higher dollar makes U.S. goods more expensive on overseas markets.

Deficit Rise Expected

“We are looking for a substantial widening in the deficit in the last part of the year as the value of the dollar begins to cut into export sales,” said Michael Evans, head of a Washington forecasting firm.

For the first half of 1989, the deficit has been running at an annual rate of $108.6 billion, down 8.4% from last year’s total merchandise trade deficit of $118.5 billion.

Many economists predict, however, that deficit growth in the last half of the year will put the total imbalance for the year exactly where it was in 1988.

For June, the improvement in exports reflected gains in sales of big-ticket capital goods and industrial supplies.

The decline in imports, which put them at their lowest level since April, reflected declines in imports of automobiles, capital goods and industrial supplies.

Another major factor in the June improvement was a sharp drop in America’s foreign oil bill.

As usual, the largest trade deficit in June was with Japan, an imbalance of $3.9 billion, down from a May deficit of $4.3 billion. The deficit with Taiwan totaled $1.2 billion in June, while the deficit with China was $700 million.