Trade Deficit Returns as War Payments Lag

America’s foreign trade balance, after posting two rare surpluses on the strength of Persian Gulf military payments, plunged back into the red during the July-September quarter, the government said Tuesday.

Analysts said the $10.5-billion deficit in the current account, the broadest measure of foreign trade, could very likely worsen further in coming months, adding one more burden to an already stagnant U.S. economy.

That would represent another setback for the Bush Administration, which is pinning a good deal of its hopes for stronger growth next year on further gains in American export sales.

The third-quarter deficit followed the first quarterly surpluses in nearly a decade. The current account surplus totaled $10.5 billion from January through March and $3 billion from April to June.

Those surpluses came as a result of $35 billion in payments from Japan, Saudi Arabia and other countries to reimburse the United States for the Persian Gulf War.

However, the Allied payments shrank to $4.6 billion in the third quarter, and this was not enough to offset a giant 33% increase in the merchandise trade deficit.

The current account, also known as the balance of payments, is considered the most important trade statistic because it measures not only trade in merchandise but also in services such as banking and tourism and investment flows between nations.

Economists forecast that this year’s current account deficit would dip to about $20 billion, far below last year’s $92.12 billion imbalance. But they predicted that it would shoot up again in 1992 to between $50 billion and $60 billion.

U.S. Current Account The broadest measure of U.S. foreign trade Quarterly balance in billions of dollars 1991: $10.5 billion Breakdown by category Third quarter 1991 in billions of dollars All services: +$9.46 Merchandise trade: -$20.49 U.S. foreign aid and pensions for Americans living abroad: -1.94 Investment income: +$2.50 Source: Commerce Department