Behind April’s Expanded Trade Deficit Is a Sign of an Economy on the Mend

The nation’s foreign trade deficit widened again in April after having narrowed for two consecutive months, the government reported Wednesday.

Commerce Department figures show that imports exceeded exports by $4.8 billion during the month, up from a $4.1-billion March shortfall that had been the smallest monthly trade deficit since 1983.

The deterioration came despite continued record exports, suggesting that import buying may be on the rise because of the improving domestic economy. Total exports increased to $35.6 billion from $34.0 billion in March, while imports surged to $40.3 billion from $38.1 billion.

Despite the April setback, the Bush Administration still expects the nation’s merchandise trade deficit to drop below $100 billion this year for the first time since 1983.

“Continued improvement in our export performance will add impetus to the economic recovery in the months ahead,” said Commerce Secretary Robert A. Mosbacher, who noted that exports rose 7% during the first four months of 1991 while imports declined 2%.

Mosbacher said in a prepared statement that the trade picture during the first four months of 1991 would produce a merchandise deficit of $65.2 billion for the full year. The 1990 deficit totaled $101.7 billion.

The gain in imports recorded in April followed two months of declines that were generally attributed to the effect of the recession on domestic demand for goods.

Increased capital investment by U.S. industry pushed imports of capital goods and industrial supplies up $1.4 billion in April, while revived domestic consumption in the aftermath of the Gulf War boosted imports of consumer goods $0.5 billion.

Similarly, the record level of exports in April reflected sales of high-value manufactured goods, with shipments to industrialized markets in Western Europe and East Asia continuing at a healthy level, the government reported.

The export boom was paced by aircraft and other capital goods, up $0.9 billion; automobiles and auto components, up $0.5 billion, and industrial supplies, up $0.3 billion. Agricultural exports declined $0.1 billion.

The nation’s trade surplus in high-technology products, which had wavered in the mid-1980s, held steady at $3.4 billion in April, off slightly from $3.6 billion in March.

National Assn. of Manufacturers spokesman Stephen Cooney estimated that exports “have knocked about 25% off the impact of the recession” on the nation’s economy during the first four months of the year.

Cooney said surging imports of capital goods suggest that the recession is ending, which signals in turn that the trade benefit provided by decreasing imports is near an end. “We see ourselves certainly out of recession before the fourth quarter, which means we’ll cease to get help on the import side.”

Economist Allen Sinai of Boston Co. said the April figures suggest that the economic recovery will limit future improvement in the trade deficit.

“This is a hint of things to come, in that we’ve probably seen the best we’re going to see--from the trade point of view,” Sinai said, “The U.S. economy is recovering, while economies overseas are weakening. The trade deficit could worsen, and that could slow down GNP growth later on.”

Merchandise Trade Deficit Billons of dollars, seasonally adjusted; import figures exclude shipping and insurance. April, ‘91: 4.78 March, ‘91: 4.07 April, ‘90: 7.62 Source: U.S. Dept. of Commerce