THE ECONOMY : Recovery Continues to Sputter, Figures Show : Indicators: Business inventories take biggest drop since January. A key trade measurement shows a drop in the deficit.
The U.S. economy continues on its cautious, sustainable recovery path, according to new indicators released by the government Tuesday, although some analysts said the figures point to possible weakening.
The Commerce Department reported that business inventories fell 0.3% in October, their biggest drop since January when they fell 0.5%.
At the same time, the department said the U.S. current account, the broadest of the trade measurements, showed a deficit of $14.2 billion in the third quarter compared to a deficit of $17.8 billion in the prior three months.
Some analysts said the data suggests that the economy continues to do better, although others believe that it is not necessarily that clear.
They have taken the view that the unexpected jump in third-quarter growth would not continue during the current three months.
In the past, analysts took the view that a cut in inventories shows a cautious approach by business, reflecting worries about accumulating inventories with the economy so shaky. Some analysts said that was likely the situation in October, although others argued that the inventory decline reflected unexpected demand as the economy grew.
“The inventory decline is probably involuntary,” said Debbie Johnson of C. J. Lawrence and Co.
The improvement in the current account also raised some questions as analysts said it may have been something of an aberration that would not continue.
“The improvement in the current account is probably temporary,” said David Kelly of the Boston Co. Economic Advisors Inc. “You still have a situation where the U.S. economy is growing faster than economies abroad.”
The new data comes against a backdrop of a generally improving economy that continues to be buffeted by bleak employment news from some of the country’s premier corporations.
At the same time, President-elect Bill Clinton has been meeting with a cross section of economic talent as he begins the complex process of honing an economic plan designed to reinforce the recovery.
Clinton said the announcement Tuesday by International Business Machines that it would eliminate 25,000 more jobs illustrates the depth of the economic malaise.
The Commerce Department, in releasing the latest indicators, said that increases in the surpluses generated by services and investment income more than offset the increase in the merchandise trade deficit, which rose to $26.5 billion in the third quarter from $24.6 billion in the second.
Looking at the inventory picture, the department said business sales were flat, although retail sales continued their upward momentum.
Trade Deficit Figures from the U.S. current account, the broadest measure of U.S. foreign trade. Quarterly balance in billions of dollars. (numbers are rounded) 1991 III: -$11.1 IV: -$7.2 1992 I: -$5.9 II: -$17.8 III: -$14.2 billion Source: Commerce Dept.
