Trade Gap Shrinks; the Budget Surplus Hits Tax-Time Record
The trade deficit narrowed dramatically in March to $8.5 billion as rising demand for American jetliners, telecommunications equipment and computers pushed U.S. exports to a second consecutive monthly record, the Commerce Department reported Wednesday.
Meanwhile Wednesday, the U.S. Treasury said it posted a record monthly budget surplus of $93.939 billion in April for the nation’s other politically sensitive deficit--the federal budget. That’s nearly $4 billion more than analysts had expected, and it’s up from April 1996’s surplus of $72.404 billion, the previous record.
The Treasury typically reports a surplus in April as tax payments pour into government coffers. This time around, the government is also benefiting from the fastest pace of economic growth in a decade, the lowest unemployment rate in a generation and booming financial markets.
Revenues, principally from taxes but also from fees and other sources, hit a record $228.59 billion in April. That was more than double the $108.1 billion taken in during March and well ahead of April 1996 revenues of $203.47 billion.
Treasury cited “the impact of large individual tax deposits” as the cause of the record revenues and surplus in April.
U.S. bonds posted their worst loss in two weeks after the two reports were issued. The yield on the benchmark 30-year Treasury bond rose to 6.95% from Tuesday’s 6.90%. Stocks at first rallied on the news but quickly gave up those gains, with the Dow Jones industrial average closing down nearly 13 points.
The Commerce report said the March trade gap between imports and exports was down 19.3% from February’s $10.5-billion deficit. Exports shot up 4.1%, offsetting a record 1.2% rise in imports.
The Clinton administration hailed the better-than-expected showing as evidence of America’s global competitive clout, but private economists called the improvement only a temporary reprieve given a number of factors acting to keep the deficit high.
Major overseas markets in Europe and Japan remain mired in slow growth while the U.S. economy is racing ahead, pushing up demand for foreign products. U.S. consumers have also benefited from a strong rise in the value of the dollar over the last two years, which makes foreign products cheaper in this country.
Of particular worry to economists is a rising deficit with Japan, which they see as a product of the dollar’s strength against the yen over the past two years. They said recent declines in the dollar are encouraging but will not help lower the deficit until next year.
In New York, the dollar settled at 114.18 yen, up from 113.04 yen Tuesday.
For March, the deficit with Japan was up 8.3% to $4.6 billion, the highest since October. The deficit will rise even further in April, based on figures already reported by the Japanese government.
America’s imbalance with China did decline by 22.4% to $2.6 billion, the smallest gap in nearly a year. Sales of commercial jetliners rose and imports of Chinese toys, shoes and clothing all declined.
Even with the March improvement, the deficit so far this year is running at an annual rate of $126 billion, compared with last year’s $114 billion, making it the worst showing in eight years.
“We are not out of the woods yet. [Wednesday’s] number is just a temporary reprieve. We have got bigger deficits ahead of us before we see any permanent improvement,” said Lawrence Chimerine, chief economist at the Economic Strategy Institute, a Washington think tank. While hailing the competitiveness of U.S. exports, Commerce Undersecretary Everett Ehrlich said the administration was still concerned that “China remains the only market in the world where U.S. exports are not growing in the long term.”
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
U.S. Trade Deficit
The overall deficit continues to reflect a deficit in the trade of goods and a surplus in services. In billions of dollars:
March: --$8.51
Source: Commerce Department
