Trade Deficit at 18-Month High in May : Commerce: U.S. exports abroad fell in the face of a sluggish world economy. Imports were fairly steady.
The nation’s foreign trade deficit reached an 18-month high in May, the government reported Friday--the result of a gradual strengthening in the domestic economy combined with a weakening in U.S. export markets abroad.
Commerce Department figures showed that imports, which actually dropped slightly, still exceeded plummeting exports by $7.4 billion over the month--up from $7.1 billion in April.
The May figures bolstered warnings by economists that the export boom that began in the late 1980s is rapidly fading and no longer can be counted on to help spur the recovery. During most of the recession, exports have been the only bright spot in the U.S. economy.
Robert G. Dederick, a former Commerce Department economist now at the Northern Trust Co. in Chicago, said the figures underscore the need for more government stimulus to help boost the recovery, either through tax and spending policies or the easing of money and credit conditions.
However, some economists believe that any further new stimulus would risk reigniting inflation. The Federal Reserve Board, which has reluctantly pushed interest rates to 30-year lows, is said to be leery of depressing them any more.
Friday’s report confirmed the underlying trade problem that the U.S. faces: Recovery in some places here at home is increasing Americans’ appetite for imports, while the recessions in Europe and Japan are crimping export markets abroad.
Although import levels actually edged down by 1.4% in May--to $42.9 billion--they continued close to the April level of $43.5 billion, which had been a 19-month high. Exports plunged by 2.5%, dropping to $35.5 billion.
The bulk of the decline in exports came in the sale of capital goods and aircraft, which tumbled $583 million during May, reflecting a generally weakening market. Sales of U.S. farm products also declined, falling 15.4% in May to $2.93 billion.
Oil imports climbed 7.2%, to a new level of $4.11 billion, partly reflecting a surge in oil prices.
Friday’s figures brought the cumulative trade deficit for the first five months of 1992 to an annual rate of $69.89 billion, up from an actual deficit of $65.39 last year after a $101.7-billion red-ink figure in 1990.
One economist, Cynthia Latta of the Lexington-based forecasting firm of DRI McGraw-Hill, predicted that the trade picture is likely to worsen in the latter half of the year, possibly reaching more than $90 billion.
But Northern Trust’s Dederick contended that the figures published for May probably were “not as bad as they appear on the surface,” in part because the decline in food exports is not likely to continue.
The May increase in the trade deficit came despite a sharp reduction in the U.S. trade deficit with Japan, which plunged by $715 million over the month to a new level of $3.5 billion. Even with the decline, the deficit with Japan still accounts for almost half the overall imbalance.
America also recorded an $893-million trade deficit with Canada, up from $609.9 million in April. Canada is the United States’ largest trading partner.
By contrast, the United States has been posting a large trade surplus with Europe. That figure widened during May to $1.22 billion, from $913.7 million the previous month. But analysts are worried that the surplus may shrink rapidly as the recession in Europe continues.
Merchandise Trade Deficit
Billions of dollars, seasonally adjusted; import figures exclude shipping and insurance.
May, ‘92: 7.38
April, ‘92: 7.06
May, ‘91: 4.98
Source: Commerce Department
Merchandise Trade Deficit, AP / Los Angeles Times
