Trade Deficit for September Hits 5-Year Low : Economy: The Commerce Department said the steep drop to $7.9 billion reflects a 2% gain in exports and a 4% decline in imports.
The nation’s merchandise trade deficit fell sharply in September to $7.9 billion, the lowest level in nearly five years, the Commerce Department said Thursday.
The improvement in the trade balance arose because exports of American goods, stagnant for the past three months, increased nearly 2% to just over $31 billion, and imports, which hit an all-time record in August, fell nearly 4% to slightly more than $39 billion.
At the same time, August’s trade deficit, originally reported at $10.8 billion, was revised sharply downward to $10.1 billion.
Manufactured goods, especially capital goods, paced the export surge. Likewise, the biggest drop in imports was in manufactured goods, especially capital goods.
Much of the export increase was accounted for by an $800-million increase in exports of commercial aircraft, a bulge that may have been exaggerated by the anticipated onset of Seattle-based Boeing Co.’s production strike, which began in October.
But even with that probable distortion, the September monthly report was welcomed as a return of deficit reductions that monthly trade figures have indicated since the annual deficit peaked at $152.1 billion in 1987.
The deficit fell to $118.5 billion last year and, through the first nine months of this year, is on track toward a merchandise trade shortfall of about $107 billion for 1989.
Indeed, the September deficit was the lowest recorded in any month since a $6.8-billion deficit in December, 1984, when the dollar was soaring and the trend line for the U.S. trade deficit was rapidly mounting.
Commerce Secretary Robert A. Mosbacher greeted the report of sharp improvement cautiously as did some economists. Some said the airplane sales bulge was misleading, and others said an import slump in September created worrisome signs that the economy is sliding perilously near to recession.
“The big thing is the weakness in imports,” said Jeffrey Bell, head of Bell Mueller Cannon Inc., an Arlington, Va., forecasting and consulting firm that has marched against the conventional wisdom by looking for a recession at the end of this year and, indeed, predicting that the downturn is already under way.
“We’ve been forecasting a mild recession starting about now, and the recent declines in industrial production and the sharp fall in imports, especially capital goods, reflect that,” Bell said. “We see an improving trade deficit, with imports and exports both slowing, lower inflation and a dollar held down by a slowing economy and lower interest rates.”
Giulio Martini of Sanford C. Bernstein & Co., New York, dismissed fears of a slump.
“The September drop in imports is off the highest month for imports ever,” he said. However, he conceded that the strike at Boeing “will knock October aircraft sales down sharply, so we can expect a temporarily worse trade situation going into the fourth quarter.”
Bruce Steinberg of the Merrill Lynch investment firm in New York likewise predicted an export slump in the aircraft-capital goods categories. He added, “If exports stay up as they have, improving about 10% a year, we could avoid recession in 1990. If they falter, then we may be in trouble.”
One bright spot, he noted, has been the emergence of Western Europe as the largest single market for American goods generally and for manufactured goods in particular, especially higher-value capital goods.
“Western Europe is now our biggest market, and the main thing we send is capital goods--and everything happening in Eastern Europe can only reinforce that,” Steinberg said. He and others said the Common Market in general and West Germany in particular will be invigorated to renewed growth by the economic and political restructuring in Eastern Europe.
In September, the United States ran a surplus of $1.2 billion with Western Europe, a dramatic reversal from the $700-million deficit in August. The perennial deficit with Japan was virtually unchanged at $4.1 billion.
“We’ve been underestimating growth in the European Community, especially in recent years,” noted Howard Lewis, international trade specialist with the National Assn. of Manufacturers. “And we’ve been selling capital goods very well into that market. But we can’t say the same for Japan.”
