Trade Deficit Climbs .7%; Both Imports, Exports Set Records

The U.S. trade deficit edged up $200 million to $27.75 billion from July through September after declining in the two previous quarters, the government reported today.

The Commerce Department said the deficit showed a 0.7% increase from the April-June quarter, when the gap totaled $27.55 billion.

The net increase resulted from a 0.2% advance in exports, which climbed to a record $91.57 billion, and a 0.3% increase in imports, which rose to a record $119.32 billion.

Both exports and imports were at record levels for the fifth consecutive quarter.

The second-quarter deficit, the difference between imports and exports, had been the lowest since a $25.7-billion imbalance in the first quarter of 1985.

For the first nine months of the year, the deficit was running at an annual rate of $111.6 billion, down 12.3% from the $127.2-billion trade gap registered in all of 1988.

The imbalance narrowed 11.4% to $28.38 billion in the first quarter and declined a further 2.9% to $27.55 billion in the second.

The report was a bit higher than expected because earlier monthly Commerce reports on merchandise trade had indicated a small improvement.

Some analysts and Bush Administration officials have questioned whether the deficit can continue to improve substantially in the months ahead.

Some say that exports, which have been propped up by prosperous overseas economies, will continue to be hampered by the relatively high value of the dollar. At the same time, imports continue to be relatively strong.

A stronger dollar makes American goods more expensive and thus less competitive on overseas markets, while making imported goods cheaper and thus more attractive to American consumers.

The Administration has based its predictions of healthy economic growth partly on the belief that exports would keep expanding.

Today’s report on merchandise trade, which is calculated on a balance of payments basis, is slightly different from the improvement already noted in the Commerce Department’s monthly merchandise trade reports.

Today’s report excludes U.S. military sales to foreign governments and makes other minor adjustments in the monthly figures.

In the third quarter, non-farm exports increased $1.2 billion, or 2%, to a record $81.8 billion. The sector was boosted by shipments of capital goods, including aircraft and parts to Western Europe, Japan and newly industrialized countries in the Far East.

Shipments of such non-farm products as industrial supplies and materials and automotive parts fell. Farm products also fell, down 10% to $9.8 billion.

Consumer goods, including clothing and household goods, led the increase in imports. Imports of industrial supplies and materials fell while both capital goods and automotive products were virtually unchanged.

Oil imports decreased 1% to $13.3 billion because of lower prices. The average price per barrel fell to $16.85 from $18.46 during the quarter, while the average number of barrels imported daily increased to 8.65 million--the highest level since the third quarter of 1977--from 7.97 million.