U.S. Trade Gap Widens Sharply During Month : Economy: The government says the increase in January was due mainly to a surge in oil imports. Unusually cold weather was blamed.
The nation’s trade deficit widened substantially in January, the government reported Tuesday, but the rise was a reaction to December’s cold snap. Analysts said the underlying trade picture remained basically unchanged.
Commerce Department figures showed that the deficit--which exists because the United States imports more than it exports--soared to $9.3 billion in January from $7.7 billion the previous month. The December figure had been the smallest since the end of 1984.
However, the widening came primarily from a surge in oil imports, as U.S. suppliers rushed to replenish their stocks following the unexpected cold spell, which had drawn fuel supplies down sharply in December and January. Oil imports fell during February as temperatures rose.
In one encouraging development, the U.S. trade deficit with Japan declined to $2.9 billion in January from $3.49 billion the previous month and $4 billion in November. It was $5.2 billion in late 1988.
Both government and private analysts said--temporary factors aside--the overall deficit appeared to be continuing to narrow gradually, if barely perceptibly. The same trend has prevailed for most of the past 18 months.
White House Press Secretary Marlin Fitzwater said the January figures were “pretty much as expected.” He said the December figure could not be sustained. It had been lower than anticipated because of a rebound in aircraft exports following the end of a strike at Boeing Corp., the nation’s leading builder of airliners.
Economist David Wyss said the January figures confirmed that “the basic trend is flat.” Wyss, of DRI-McGraw Hill, a Cambridge, Mass., economic forecasting firm, predicted that it would be “a long, slow process to get the trade deficit down any further.”
Robert G. Dederick agreed. “The basic message has to be we’re really hanging in there on a plateau,” said Dederick, a former Commerce Department economist now at Northern Trust Co. in Chicago. “There may be a gradual down trend, but basically we’ve stalled out.”
Economists said they now expect the deficit to total between $105 billion and $110 billion for all of 1990, near the $108.9 billion that was posted last year. The trade deficit had been declining since its peak of $152.1 billion in 1987.
The improvement in the deficit with Japan comes as the two countries are engaged in intensive negotiations over what, if anything, Japan should do to meet U.S. demands that it open its markets more fully. Tokyo has hammered out a proposal for new trade concessions, but the Bush Administration has said those moves are not enough.
High-level officials from both countries met in a Virginia retreat on Tuesday to discuss the issues further, but U.S. trade negotiators said no immediate breakthroughs were expected. The group is scheduled to issue an interim report in just over a week.
Separately, the Bush Administration announced that Treasury Secretary Nicholas F. Brady will meet Japanese Finance Minister Ryutaro Hashimoto at an undisclosed location in California on Friday for a general review of economic issues.
U.S. officials said the session, similar to talks that Brady held with European finance ministers in late February, was not expected to result in any decisions. Brady, Hashimoto and their European counterparts are scheduled to meet as a group in Paris on April 7.
Analysts cautioned that the trade figures published Tuesday were skewed by a variety of special factors. Besides the surge in oil imports, trade flows also were upset by the brief shutdown of the Panama Canal, following the U.S. invasion there in December.
Nevertheless, there were some encouraging developments: U.S. exports jumped smartly, rising by $1.23 billion--4% higher than in December. Moreover, the increase was concentrated in capital goods, a staple of U.S. manufacturing industries.
At the same time, however, imports leaped by $2.8 billion, or 7.3%, indicating that the economy may not have slowed as dramatically as some analysts had thought. Some policy-makers believe that economic growth will have to wind down further before import-buying declines.
The surge in oil imports during January was dramatic by any measure. The volume of oil rose to an all-time high of 291 million barrels, topping a previous record set in August. Prices also shot up--to $20.13 a barrel, from $17.97 in December. They averaged $16.80 in 1989.
The American Petroleum Institute has estimated that foreign oil accounted for a record 54% of overall U.S. consumption in January as domestic production fell to its lowest level in a quarter of a century.
Imports of clothing and apparel also rose sharply, but U.S. purchases of foreign-made manufactured goods were still below the average for 1989. Imports of automobiles, trucks, telecommunications equipment and electrical machinery all declined.
Economists are divided over how serious the trade picture is for the United States. Dederick warned that although financial markets had been distracted by developments in Eastern Europe, the deficit still was high and might someday be a factor in driving down the value of the dollar.
“Right now the trade deficit story has backed its way into the business section, but one of these days the markets might start looking again and not like what they see,” Dederick said. He added that the high deficit was “not a crisis but continues to be a cloud overhanging.”
THE TRADE DEFICIT Billions of dollars, seasonally adjusted; import figures exclude shipping and insurance. Jan. ‘89: 8.52 Dec. ‘89: 7.68 Jan. ‘90: 9.25 Source: Commerce Department
