U.S. Deficit Continues at Record Pace

The U.S. trade deficit with the rest of the world continued to sail along at a record level in May, fueled largely by a huge appetite for imported oil, the Commerce Department reported Tuesday.

But Clinton Administration officials were encouraged by figures showing exports growing consistently faster than imports.

The trade deficit in May reached a record $11.43 billion, $10 million over the previous record of $11.42 billion set in April.

Although monthly figures are notoriously volatile, the data for May show the rate of increase in Japan’s exports to the United States slowing suddenly, to a large extent because Japanese car companies accelerated shipments to this country in April to beat a possible tariff increase. That increase was avoided at the last minute when the United States and Japan settled their auto trade dispute June 28.

Although U.S. purchases of foreign-made goods are increasing, U.S. Trade Representative Mickey Kantor said, “the rate of increase in exports is going up even faster.”

Over the first five months of the year, imports have grown 18.6%. Exports also grew at a healthy, but slower, rate of 16.2% during the same period. But in May, exports grew 18.1% and imports fell slightly behind that pace.

“That’s good news,” Kantor said.

But financial consultant and analyst Charles W. McMillion of MBG Information Services in Washington said that even if exports are growing, “it’s irrelevant” because American wages are dropping as companies compete with low-wage foreign producers and reduce their profit margins.

“Still, month after month the trade deficit is getting worse and worse,” he said.

The growth in imports came as a surprise to trade experts, who had been predicting that imports would fall back. According to the Commerce Department, exports rose 1.3% to $64.81 billion, a record, but imports also climbed, growing 1.1% to $76.24 billion.

The United States spent $4.05 billion for imported oil in May, a 15% increase over the previous month and the greatest amount spent on foreign crude since November, 1990. It was the fifth month in a row that the oil bill grew, with crude prices reaching an average of $17.39 per barrel, the highest level since November, 1992.

Imports of computer chips were up $262 million and computer imports grew by $65 million, contributing to the deficit. Major U.S. exports included industrial engines and telecommunications equipment. Shipments of civilian aircraft dropped 19.4%.

Although the Mexican economy now appears relatively stable, the peso crisis continues to rumble through the U.S. economy, with the weakened Mexican currency making it more difficult for Mexico to buy U.S. goods. The U.S. trade deficit with Mexico grew 10.5% in May to $1.63 billion, despite the North American Free Trade Agreement’s tariff-reducing benefits.

Among other major trading partners, China ran up a $2.84-billion surplus in trade with the United States in May.

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U.S. Trade

Overall deficit, in billions of dollars:

May 1995: -$11.43

Source: Commerce Department