1989 Trade Deficit Narrows to 5-Year Low: $108.58 Billion
The U.S. trade deficit, aided by a dramatic 30% improvement in December, narrowed to $108.58 billion last year to post the smallest yearly imbalance since 1984, the government reported today.
While economists were pleasantly surprised by the $7.17-billion December deficit, they were unimpressed by the modest decline for the year.
The 8.4% decline in the annual deficit, down from $118.53 billion in 1988, represented a sharp slowing in the pace of improvement. The deficit had dropped 22.1% in 1988.
Many economists are forecasting that the country’s trade performance could actually worsen this year after two years of improvements as America’s dependence on foreign oil grows to record highs and consumers’ appetite for foreign goods shows little sign of slackening.
But the Bush Administration hailed the new trade figures as an indication that the improvement evident since 1988 is not in danger of stalling out.
Commerce Undersecretary Michael Darby noted that U.S. exports were up 13%, outpacing a 7.3% rise in imports.
“Growth in exports was strong across most categories of goods, including . . . a wide variety of manufactured goods, especially machinery and telecommunications equipment,” he said.
As usual, the country’s largest imbalance in 1989 was with Japan, a $49-billion deficit that accounted for 45% of the total.
Another big part of the deficit came from oil imports, which surged 27.2% in 1989 to $48.94 billion. It was the highest yearly total since a $52.4-billion foreign oil bill in 1984.
One of the primary reasons analysts are looking for little or no improvement in the trade deficit this year is a belief that U.S. dependence on foreign oil will continue to grow. The American Petroleum Institute reported that imports reached an all-time record of 54% of total demand in January while domestic production fell to its lowest level in a quarter-century.
The December deficit of $7.17 billion was the lowest monthly imbalance since a $6.79 billion deficit in December, 1984.
The 30% improvement from November’s $10.29-billion deficit occurred because exports rose 2.4% to $31.11 billion, the second-highest level on record, while imports fell 5.9% to $38.28 billion.
For December, the $3.1-billion improvement represented a big jump in American exports of aircraft, reflecting the end of the Boeing strike, and smaller increases in office equipment, artwork and antiques and industrial machinery.
The Bush Administration is counting on a continued improvement in the trade deficit this year to dampen protectionist sentiment in Congress and to spur overall economic growth.
However, many private forecasters are predicting that the deficit will begin rising this year, reflecting slower growth in U.S. exports and the higher foreign oil bill.
“It is pretty fundamental that we are not competitive in world trade,” said Allen Sinai, chief economist of the Boston Co. “If Americans won’t buy American goods, there is no reason to expect the rest of the world to do so.”
