In a bright note for the U.S. economy, the nation's trade deficit fell 35% to an eight-year low of $66.2 billion in 1991 as exports reached record levels and recession-wary consumers cut back purchases of imported goods, the Commerce Department reported Thursday.
Despite the overall improvement, however, America's trade deficit with export-minded Japan grew to $43.4 billion, or two-thirds of the U.S. imbalance with all other nations of the world. China accounted for another $12.69 billion of the deficit, reflecting a 21% gain from 1990.
The year ended on an ominous note, however. A slump in exports and an increase in imports raised the December trade shortfall 42% to $5.9 billion. Several analysts predicted that the U.S. trade deficit would climb again this year if the recession gives way to a moderate recovery and consumers resume their heavy buying of imported goods, including Japanese cars.
Meanwhile, the Labor Department reported that the number of workers filing new claims for jobless benefits, reflecting recent layoffs, increased by 18,000 to 452,000 during the first week in February. California recorded the biggest increase in new claims, 20,800, reflecting layoffs in electronics, other manufacturing and agriculture.
Noting that the average number of initial claims nationally has leveled off at 450,000 over the past four weeks, analyst Robert Brusca of Nikko Securities said: "The economy remains in a deep freeze."
His comment contrasted with testimony Wednesday by Federal Reserve Board Chairman Alan Greenspan, who predicted a moderate recovery would begin in the spring, fed by January rebounds in home building and retail sales.
On the trade front, the 1991 improvement resulted from a 7.2% gain in U.S. exports to a record high $421.85 billion, led by aircraft, computers, semiconductors and auto sales overseas. Western Europe bought more American goods, producing a U.S. trade surplus of $16.13 billion last year.
Imports declined by 1.5% to $488.06 billion, as consumer demand fell for foreign products as well as domestic items. Sales of imported cars dropped by $2 billion, for example, while U.S. purchases of foreign oil plunged by $10.3 billion.
The resulting $66.2-billion deficit was the best trade performance since 1983, when the U.S. economy was emerging from recession and the deficit dropped to $52.4 billion. The next year--and every year up to 1991--the trade imbalance worsened. It hit a peak of $152.1 billion in 1987.
Economists said any improvement in the domestic economy, however, was expected to affect the U.S. trade performance this year by increasing imports and possibly slowing the surge in exports that helped slash the global deficit in 1991.
"We think things are going to get worse in '92 because the economy is going to be recovering and sales of imports will go up," said David Wyss, research director for DRI/McGraw Hill. Exports, Wyss said, will be reduced because of a slowdown in the global economy that is just starting to gain momentum.
John Zysman, director of the Berkeley Roundtable on the International Economy, said the reduction in the trade deficit for 1991 was welcome but could be explained almost entirely by a recession-related plunge in imports and a dramatic drop in the value of the dollar, lowering U.S. export prices.
"The question is, are we positioning ourselves as a lower wage, lower skilled economy?" Zysman asked. "I think that's happening. Many of the areas where we are strongest, such as aircraft, are areas where there are strong (foreign) challengers, so our position is not as secure as it once was."
Another analyst, William Cline of the Institute for International Economics, said it would take an additional drop of 5% or 10% in the value of the dollar and substantial progress in lowering the federal budget deficit to reduce the trade deficit much more.
"It seems unlikely we'll have much improvement this year as the United States comes out of recession," Cline said.
Declining Trade Deficit
America's trade deficit improved dramatically last year, falling below $100 billion for the first time in eight years. But analysts worry that a big jump in December's deficit signals bleak days ahead. And the deficit with Japan remains stubbornly high, largely because of imports of automobiles and advanced electronics.
Billions of dollars