Trade Deficit Rises After 6 Months in Decline

The U.S. trade deficit, after improving for six months, deteriorated slightly to $27.75 billion in the third quarter, fed by America’s appetite for imported goods and by flat exports, the government said Tuesday.

Analysts do not see much improvement in the near future. Imports may drop somewhat because of a slowing U.S. economy, they said, but exports also are likely to fall because of a strong dollar and moderating economies overseas.

The Commerce Department said the gap between imports and U.S. exports edged up 0.7% in the July-September quarter from the second quarter’s $27.55 billion. The April-June gap deficit was the narrowest since a $27.7-billion imbalance in the first quarter of 1985.

Imports posted a 0.3% gain to a record $119.3 billion, while exports rose only 0.2% to $91.6 billion, also a record. Both imports and exports have reached record levels during each of the last five quarters.

But analysts worry that exports, which sustained much of the U.S. economy last year, will remain unchanged in the months ahead.

“The trade report substantiates what we’ve already seen,” said Allen Sinai, chief economist of the Boston Co. “Export growth simply has flattened out after booming previously and is a major source of the wave of weakness rippling through the U.S. economy, particularly the manufacturing sector.”

Samuel D. Kahan, chief financial economist for Kleinwort Benson Government Securities Inc. in Chicago, agreed that the pace of exports is “probably coming to the end of its run due to the dollar.”

A stronger dollar makes U.S. goods more expensive and thus less competitive overseas, while making imported goods cheaper and thus more attractive to American buyers.

Kahan also said that “as the (British) economy slows, which seems likely, and some of the other industrial countries, particularly Japan, moderate their (economic) activity, that should hurt our exports.”

Sinai said he expected imports to decline and the U.S. economy to weaken in the next few quarters.

But Lawrence Chimerine, senior economic adviser for the WEFA Group in Bala-Cynwyd, Pa., pointed to the high level of oil imports, which he said will continue and further aggravate the trade deficit.

The Commerce Department said the average number of barrels imported daily increased 8.5% to 8.65 million barrels in the third quarter--the highest level since the third quarter of 1977.

But despite the increase, oil imports showed a July-September numerical decrease of 1% because of lower prices. The average price per barrel fell to $16.85 from $18.46.

Non-oil imports rose 0.5% to $106 billion, led by consumer goods, including clothing and household goods. Imports of industrial supplies and materials fell, while both capital goods and automotive products were virtually unchanged.

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