Exports Up, Output Down, U.S. Reports

The recession dragged down the nation’s industrial output by 1.9% in 1991 for the first decline in nine years, but a strong export showing helped to shrink the U.S. trade deficit in November to the lowest level since early 1983, the government reported Friday.

The Federal Reserve Board said that production at mines, mills and utilities fell by 0.2% in December as they operated at only 79% of capacity. It was the third consecutive monthly drop in industrial production, renewing economists’ fears that the recession was deepening.

But other analysts said unusually warm winter weather that lowered utilities’ heating output accounted for a large part of the December decline. They said the decline did not indicate a renewed slump in the economy.

“It confirms the little recovery we had hit a brick wall and it’s pretty much flat,” said Rudolph Penner, an economist at the American Enterprise Institute. “But there’s no sign of a cumulative decline.”

The new figures are certain to be cited by members of Congress, returning to Washington next week after a long holiday recess, as they step up debate on proposals for tax reductions, investment incentives and economic recovery programs.

The Fed said industrial production fell throughout the October-to-December quarter following a slight pickup in the spring and summer.

It reported that utilities’ output dropped sharply by 3% last month, following a gain of 1.3% in November, as unseasonably high temperatures reduced the demand for electricity and gas for heating. Excluding motor vehicles and parts, overall industrial output declined by 0.1% in the last two months of 1991 as mining activity went down by 0.3% in December on the heels of a 1.4% plunge in November.

Allen Sinai, an economist with Boston Corp. in New York, said the report shows the economy has only weak momentum going into the new year. “The industrial sector clearly was in the double-dip category in the fourth quarter, falling back after a recovery that occurred in the spring and summer,” he said.

But Gordon Richards, an economist for the National Assn. of Manufacturers, disputed Sinai’s appraisal.

“The decline (in December production) is caused by special factors--unusually warm weather and a continuing weakness in auto assemblies--that is not symptomatic of a double-dip slide,” Richards said.

In the trade report, the Commerce Department said that American export sales climbed by 0.9% to a record-high $37.5 billion in November, while imports plunged by 5.5% to $41 billion as the weak economy took its toll and worried consumers cut back their spending.

The deficit declined to $3.6 billion, the lowest monthly figure in almost nine years. The report virtually assured that the full-year deficit in 1991 would run about $65 billion, well below $100 billion for the first time since 1983.

Acting Commerce Secretary Rockwell Schnabel termed the trade figures “welcome news” because U.S. exports last year, led by aircraft and computers, were up by 7.5% over the corresponding period in 1990.

“I am confident that export growth this year will be an important contributor to the U.S. economic recovery,” Schnabel said in a statement.

Sinai sharply disagreed with that upbeat assessment. He termed November’s trade results as a “clear-cut recession report” because the sharp drop in Americans’ purchase of foreign goods reflected low consumer confidence.

While the gain in exports was healthy, Sinai added, future increases in value of U.S. products sold abroad may be jeopardized by a continuing weakness in economic conditions in Europe.

Japan accounted for 73% of the U.S. trade deficit in November, or $3.41 billion.

The rise in exports came in large part from a big jump of $750 million in overseas sales of American aircraft. Shipments of U.S. farm products were also up in the month, rising $157 million.

On the import side, there were big drops in a number of categories. Imports of autos fell by $750 million with the declines equally split between Japan and Canada. Imports of semiconductors and other computer hardware fell by $250 million while imports of jewels dropped by $225 million and purchases of foreign artwork and antiques declined by $175 million.

America’s foreign oil bill fell 5.2% in November to $3.95 billion as the volume of shipments fell to 5.13 million barrels per day, down from 5.69 million daily barrels shipped in October. The price per barrel rose, however, to $18.04 up from $17.98 the previous month.