Trade Deficit Narrows to 6-Year Low

The U.S. trade deficit narrowed dramatically to $22.58 billion from April through June, the lowest quarterly imbalance in more than six years, the government reported today.

However, analysts were quick to note that the deficit had been pushed lower primarily by falling oil prices, a situation that has been reversed by the Aug. 2 invasion of Kuwait by Iraq. The Commerce Department said the 14.1% improvement from a first-quarter deficit of $26.28 billion reflected lower petroleum imports and a record level of U.S. export sales.

For the second quarter, U.S. exports totaled an all-time high of $96.74 billion, up 0.5% from the previous record of $96.26 billion set in the first quarter.

The Bush Administration is counting on continued strong export sales to provide the momentum needed to keep the country out of a recession, a prospect that has grown more uncertain with the economic shocks coming from the turmoil in the Mideast.

U.S. imports fell 2.6% in the second quarter to $119.32 billion, an improvement of $3.2 billion.

The $22.58-billion trade deficit, the difference between imports and exports, was the smallest since a $21.3-billion deficit in the fourth quarter of 1983.

As usual, the biggest imbalance occurred with Japan, a deficit of $10.4 billion, up slightly from a $10.3-billion first quarter deficit.

The United States posted a rare $1.5-billion second quarter surplus with Western Europe, up from a $400-million surplus in the first quarter.

The figures in today’s report on merchandise trade, calculated on a balance-of-payments basis, confirmed trends noted in the department’s monthly merchandise trade reports, which showed a second quarter deficit of $20.15 billion.

Petroleum imports, which had risen sharply in the first quarter, declined by $3.5 billion in the second quarter, primarily reflecting a sharp decline in price.