Trade Deficit Rises to $7.7 Billion as Oil Imports Jump

Despite continuing expansion of U.S. exports, the nation’s trade deficit jumped to $7.7 billion in May from $7.3 billion the previous month, primarily because of a surge in oil imports, the Commerce Department reported Tuesday.

However, analysts indicated that the increase in the deficit was a temporary setback in an otherwise improved trade picture. They noted that overall the growth of exports is outpacing the growth of imports. At the current rate, the trade deficit this year will be about $98 billion, compared to $109 billion last year and $119 billion the previous year.

In another trade matter, the Senate on Tuesday passed a textile import quota bill by a 68-32 margin--two votes more than the minimum that would be needed to override a threatened presidential veto.

The bill would limit the increase in imports of textiles and apparel to 1% a year and would freeze imports of non-rubber shoes at 1989 levels. It runs the risk of being deemed in violation of international trade obligations under the General Agreement on Tariffs and Trade, which is facing crucial multinational negotiations later this year.

A counterpart bill is stalled in the trade subcommittee of the House Ways and Means Committee, where the leadership has expressed reluctance to approve trade quota legislation designed to protect a specific industry.

A similar bill was passed by both houses in 1988 but was vetoed by President Ronald Reagan. Observers predict that the measure is unlikely to pass in the House and--even if it does--is even less likely to survive a veto.

The trade deficit figures announced by the Commerce Department were interpreted by many analysts as a continuing reason for some optimism from the U.S. perspective.

David Wyss of DRI/McGraw-Hill, a forecasting firm in Lexington, Mass., noted that, for the year so far, “imports are down 1% from a year ago as domestic consumption slows in a softening economy, while exports are up 7% over the same period.”

Oil imports accounted for almost half of the increase in imports in May.

MECHANDISE TRADE DEFICIT

Billions of dollars, seasonally adjusted; import figures exclude shipping and insurance.

MAY,’90: $7.73

APRIL,’90: $7.31

MAY,’89: $10.38

Source: Commerce Department