Trade Deficit Up 1O%; China Gap Again Leads

The trade deficit jumped unexpectedly in September as exports fell and imports of costly oil rose, the government said Wednesday, indicating slower economic growth in the latter part of the year.

The deficit jumped 10% in September, to $11.34 billion from a revised $10.30 billion in August, the Commerce Department said.

That capped the nation’s worst third-quarter trade performance in nine years, marked by a steadily mounting deficit with China, which surpassed Japan during the quarter as the biggest contributor to the overall trade gap.

Exports fell 1.4% to $68.79 billion, while imports grew 0.1% to $80.13 billion. The total deficit of $33.2 billion for July through September was the highest since a $38.6-billion trade gap in the third quarter of 1987.

Economist Joel Naroff of First Union Corp. in Charlotte, N.C., described the deterioration in September trade as “a truly pathetic performance” and warned that the situation with China is becoming critical.

Secretary of State Warren Christopher met with Chinese officials in Beijing on Wednesday and President Clinton is to meet with Chinese President Jiang Zemin on Sunday at an Asia-Pacific economic summit in the Philippines.

Once again in September, the deficit with China was bigger than that with any other country. It rose 0.4% from August to $4.73 billion. The third-quarter deficit with China grew to $13.3 billion, exceeding the $11.9-billion gap with Japan.

Analysts said the drop in September exports meant that the economy was probably weaker in the third quarter than had been thought. They said the economy most likely grew at a 1.8% rate in the quarter, compared with the Commerce Department’s previous estimate of 2.2% growth.

“Net exports is going to be a bit more of a drag [on the economy] than what was estimated initially,” said Chris Iggo, chief economist at BZW Securities Inc.

“This will further constrain an expansion that is already looking at the possibility of softer consumer demand,” said Naroff of First Union.

A consensus estimate by a number of economists and analysts had forecast a September trade gap of $9.5 billion.

The National Assn. of Manufacturers warned that the dollar’s appreciation against other currencies is making American-made goods too costly for foreigners.

“The current level of the dollar is preventing the expected boom in U.S. exports,” Jerry Jasinowski, president of the manufacturers group, said in Washington on Tuesday.

Commerce Secretary Mickey Kantor blamed September’s soft trade performance on sluggish economies in Europe, Canada and Japan. Kantor, who is leaving the top post in the Commerce Department, also said the United States “must continue to assign great importance to the Chinese” and make them meet international agreements.

The trade report initially sent the dollar lower, as traders bet that Washington might try to bring the currency lower to help make American exports more competitive. But the dollar regained most of the lost ground by midday.

Imports of petroleum products jumped 9.3% in September to $5.97 billion. The price per barrel of imported crude oil hit $20.02, the highest since the $22.98 a barrel reached in January 1991 during the Gulf War.

As a result, the monthly deficit with members of the Organization of Petroleum Exporting Countries soared 27.8% to $2.2 billion in September, the highest since November 1990.

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U.S. Trade Deficit

Overall deficit in goods and services, in billions of dollars:

Sept. 1996: -$11.34

Source: Commerce Department