The nation's foreign trade deficit widened substantially in January, the government said Thursday, providing the first firm sign that the Asian financial crisis is having an effect on the U.S. economy.
Commerce Department figures show that the United States imported $12 billion more in goods and services than it exported in January, up $1.1 billion from December's level and the largest monthly trade deficit since the index was created in 1992.
Meanwhile, the Labor Department said its index of consumer prices rose by 0.1% in February after remaining flat during the previous month, continuing the price stability that has prevailed for most of the last year.
The trade figures for January provide the most visible indication so far that the Asian economic slump is affecting the U.S. economy. Until now, statistics have shown relatively little effect from the turmoil overseas.
Analysts said the crisis in Asia, which is
spurring Asian countries to cut back their purchases of U.S.-made goods while trying to sell more Asian products to America, is likely to exert a drag on U.S. economic growth. The collapse of Asian currencies against the dollar has made products from Asia cheaper in the United States and American goods more expensive in Asia.
The effect was most apparent in the figures on U.S. trade patterns with newly emerging markets in Asia, such as South Korea, Thailand and Taiwan. The deficit for that group nearly tripled to $2.2 billion in January from $800 million in December.
Robert G. Dederick, economist for Northern Trust Co. of Chicago, said the figures offer no clue as to how large an effect the Asian slump will have on the U.S. economy. "We're just in the early stages," he said. "We don't yet know how bad it's going to get."
The January increase in the trade deficit reflects a sharp decline in U.S. exports and a modest dip in imports. Overall, U.S. exports dropped by $2.07 billion, or 2.6%, to $77.28 billion. Imports fell $920 million, or 1%, to $89.33 billion.
Beyond the newly emerging economies in Asia, there were mixed patterns in the region. The U.S. trade deficit with Japan actually narrowed in January to $4.37 billion, from $5.1 billion in December, while that with China widened to $4.2 billion, from $3.9 billion.
Economists expect the bulk of the impact on the U.S. economy to come from cutbacks in U.S. exports. Although imports here are expected to increase, much of what Asia makes--many electronic products, for example--are not made here, so competition from Asia would not threaten U.S. jobs.
Analysts said the change in trade patterns has primarily hit exporters in California and other Western states, where as much as 50% of foreign trade is with Asian countries. But there has been some effect in virtually every region of the U.S.
Except for Thursday's figures, however, little of the effect has shown up in the major economic statistics so far.
Many economists believe that the drag from the Asian crisis actually may be good for the U.S. economy because it will dampen inflation and help avert overheating.
Barry P. Bosworth, a Brookings Institution economist, said Thursday that, were it not for the effect of the Asian slump, the Federal Reserve Board almost certainly would have raised interest rates sharply by now to ward off inflationary pressures.
Dana Johnson, an analyst for First Chicago Capital Markets, said the American economy is now so strong that the United States is well-positioned to withstand the effects of the Asian slump with only minimal damage. "I don't think you throw up your hands here," he said.
The Clinton administration used the trade figures to again urge Japan to stimulate its domestic economy. U.S. officials said that would raise the value of the yen, which in turn would help Asian economies recover and hold down the U.S. trade deficit.
Deputy Treasury Secretary Lawrence H. Summers said Washington hopes to see Tokyo enact sizable tax cuts or new spending programs to spur consumer spending. He also urged Japan to speed its deregulation and financial restructuring efforts.
The administration has been urging Tokyo for months to take steps to jump-start its economy, but so far the Japanese government's steps have been modest, despite heavy pressure from the United States and other major industrial nations.
The fact that the rise in consumer prices was held to 0.1% in February was good news for the U.S. economy. In the 12 months that ended February, consumer prices rose only 1.4%--their slowest pace since December 1986.
Much of the good performance stemmed from another sharp drop in energy prices, which plunged--3.3% in February--for the third month in a row. The so-called core rate of inflation, which excludes volatile food and energy prices, rose 0.3%.
Food prices remained unchanged in February as transportation costs fell 0.4%, recreation costs increased 0.3%, housing costs rose 0.1% and medical service costs rose 0.3%. Analysts said food prices will soar soon because of crop damage from El Nino-related storms.
Meanwhile, the Labor Department reported that the average hourly earnings of factory workers rose by 0.6%, up from a revised 0.3% in January, reflecting continuing pressure on wages in the face of a growing labor shortage resulting from the current economic boom.
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U.S. Trade Deficit
The overall gap continues to reflect a deficit in the trade of goods and a surplus in services. In billions of dollars:
Jan.: --$12 billion
Source: Commerce Department
Consumer Price Index
Monthly percentage change, seasonally adjusted:
Source: Bureau of Labor Statistics