U.S. trade deficit fell 1.6% in June, government says

August 19, 1994|By New York Times News Service

WASHINGTON -- In a report analysts said reflected a recovering global economy, the Commerce Department said yesterday that the nation's trade deficit fell slightly in June.

The 1.6 percent decline, to a seasonally adjusted $9.37 billion, from $9.51 billion in May, was primarily due to increased exports, which rose to a record level in June.

Still, the trade deficit with Japan widened in June, unnerving the currency markets and sending the dollar below 100 Japanese yen again.

The 3.6 percent gain in overall exports, to $58.17 billion, helped offset a 2.8 percent increase in imports, to $67.54 billion. Nearly half the import increase was due to a record monthly purchase of foreign oil.

While the export statistics confirmed an increase in demand for U.S. products, analysts said the rise in imports was additional evidence that the U.S. economy entered the second half of 1994 under a healthy head of steam.

"These numbers only confirm the still-robust nature of the U.S. expansion," said John Lipsky, chief economist at Salomon Bros.

There was optimism, too, from Paul Mastroddi, a managing director at J. P. Morgan & Co, who said: "It is absolutely true that the United States is growing faster than the rest of the world. And all countries that are growing fast experience trade deterioration. But it is important to note that Europe and Japan are turning around. Every aspect of this report points to strong growth and a strengthening global economy."

With foreign economies showing increasing signs of recovery, the dollar weak against major currencies and the chances increasing that the U.S. economy will experience slower growth in the second half, analysts said the trade deficit is likely to narrow further over the next six months and beyond.

But that prospect did little to alter their predictions that for all of 1994, the U.S. merchandise trade deficit will come close to equaling the record of $152.1 billion established in 1987.

"We will still have a record or near-record merchandise trade deficit," Mr. Lipsky said.

"But relative to gross domestic product, the imbalances are moderate compared to what they were in the mid-1980s, because the domestic economy has been growing at a faster pace."

Despite the slight improvement in trade, the report showed that the United States' deficit with Japan widened in June by $1.13 billion, to $5.52 billion, the biggest monthly deficit since March.

Imports from Japan totaled $10.08 billion, also the highest since March.

C. Michael Aho, senior international economist at Prudential Securities, said that the U.S. deficit with Japan, calculated in yen, was already starting to improve.

But because the effects of currency fluctuations on trade figures lag by 12 to 18 months, he said it will be some time before the Japanese trade surplus begins to narrow in dollar terms.

"For the depreciating country, things get worse before they get better," Mr. Aho said.

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