U.S. Trade Deficit for February Zooms 46% to $9.7 Billion : Commerce: The deterioration is led by big drops in overseas sales of airplanes, computer chips and pharmaceuticals.
The U.S. trade balance deteriorated sharply in February as a big drop in the sale of airplanes, computer chips and pharmaceuticals contributed to the nation’s worst merchandise trade deficit in six years, the government said Tuesday.
The Commerce Department said the deficit in goods and services widened unexpectedly to $9.71 billion in February, 46% higher than January’s revised deficit of $6.64 billion. Many analysts had been looking for the deficit to show a slight improvement.
The deterioration came from weakness in exports and a big jump in imports. Merchandise exports fell by $1.36 billion as foreign demand weakened in a number of areas. At the same time, merchandise imports shot up by $1.17 billion, reflecting higher shipments of oil and cars.
Analysts said the weakness in exports was the most troubling part of the report, noting that American manufacturers are going to have a tough time this year because of sluggishness in many overseas markets.
“U.S. export growth came to a shuddering stop in February,” said Stephen Cooney, senior policy director at the National Assn. of Manufacturers. He said a big drop in sales to Europe was “particularly frightening” because this area had been one of America’s top export markets.
Economists blamed recessions in Germany and other European countries and Japan for the weakness and said significant improvement is unlikely until next year.
Bruce Steinberg, senior economist at Merrill Lynch, said he was reducing his first-quarter estimate for U.S. economic growth, as measured by the gross domestic product, to a rate of 3.5%, down from 4% because of the surprisingly bad February trade performance.
Such a development would normally spur a rally on Wall Street, where investors have been worried that signs of too-strong an economy would force the Federal Reserve Board to tighten interest rates further. The Fed on Monday announced that it was boosting its target for short-term interest rates to 3.75%, the third quarter-point tightening this year.
However, trading for most of the day followed a zigzag pattern with little direction. The Dow Jones industrial average was up less than a point to close at 3619.82, regaining little of the ground lost in Monday’s 41.05-point selloff following the Fed rate hike.
The February trade report marked the second month the government has included services in its monthly trade data. Services, including such things as tourism, movie rentals and insurance, was added to the report to draw attention to the fact that America runs surpluses in this area that help alleviate chronic deficits in the merchandise area.
However, for February, the services surplus slipped 11.2% to $4.18 billion. The government blamed the deterioration in part on network television payments for broadcasting the Winter Olympics, as well as an increase in U.S. travel to Norway to see the Games.
For all of 1993, America’s deficit in goods alone totaled $132.4 billion, the worst showing since 1987. However, the total deficit in goods and services was a lower $76.76 billion, reflecting the fact that the United States ran a $55.68-billion surplus in services.
David Wyss, an economist at DRI-McGraw Hill, said he expects the merchandise deficit to top $150 billion this year, reflecting economic weakness in major U.S. export markets.
Commerce Secretary Ronald H. Brown said the February trade report “illustrates the risk to the U.S. recovery posed by slow growth abroad.” He said it highlights the need for Europe and Japan to do more to lift their economies out of recession.
