U.S. Feb. Trade Gap Unexpectedly Widens to New High Amid Falling
Exports
U.S. Economy: Feb. Trade Deficit a Record $19.4 Bln (Update4)
(Adds comments from Commerce Secretary Daley, closing
markets.)
Washington, April 20 (Bloomberg) -- The U.S. trade deficit
in goods and services surged to a record in February as consumers
snapped up clothing, toys, cars and other imports at a record
pace while exports fell for the fourth month in a row.
The deficit widened to $19.4 billion in February, topping
the previous record shortfall of $16.8 billion in January, the
Commerce Department said.
''The robust U.S. economy is sucking in goods from
everywhere,'' said Joel Naroff, chief economist at Naroff
Economic Advisors in Holland, Pennsylvania. ''The U.S. economy is
the strongest in the world, and until we start seeing better
growth elsewhere, the trade deficit will stay extremely wide.''
U.S. trade deficits with Europe, Mexico, Japan and most
other Asian nations widened in February, while the shortfall with
China narrowed.
Imports rose 2.3 percent to $96 billion during the month as
Americans' appetite for consumer goods and autos from overseas
increased. ''This is a clear indication that the U.S. economy is
still running hot,'' said David Bloom, an economist at HSBC
Markets in London.
Exports fell 0.6 percent to $76.6 billion, in large part
reflecting a 27.8 percent drop in commercial aircraft shipments.
Jet Exports Decline
Boeing Co., the world's biggest aircraft maker, reported
exports of its commercial jets fell to 18 in February from 19 the
previous month. It also sold fewer of its wide-body 767 and 777
models, magnifying the dollar decline in sales.
Manufacturing exports outside of aircraft generally held up,
and more recent reports -- including the latest survey from the
National Association of Purchasing Management and Boeing's report
of a rebound in March sales -- suggest factory exports could
rise.
Adding to February's overall deficit was a 5.1 percent
increase in auto imports. That translated into higher sales for
companies like DaimlerChrysler AG, Toyota Motor Corp. and Honda
Motor Co.
Still, with total U.S. auto industry sales rising to a
record annual pace of 17 million that month, there has also
strong sales for vehicles produced at U.S. factories operated by
Ford Motor Co., General Motors Corp., Toyota and Honda.
Slap at China
U.S. Commerce Secretary William Daley said he's counting on
recent interest-rate cuts by central banks in Europe to boost
growth there. And while he said he's encouraged about a rebound
in demand for American goods from South Korea and other
recovering Asian economies, he took a swipe at China -- even as
the trade deficit with it decreased to $4.6 billion in February
from $4.9 billion during January.
''If China wants to be a true global trading partner and a
member of the World Trade Organization, the Chinese government
must promptly agree to open her markets to foreign goods and
services,'' Daley said.
The dollar rose more than 1 percent against the Japanese yen
after the trade report and a separate report from the
International Monetary Fund focused attention on the disparity
between the growth rate of the U.S. and the lack of an economic
recovery in Japan.
Stocks rose. The Standard and Poor's 500 stock index rose
16.69 points, or 1.29 percent, to close at 1306.17. The Nasdaq
Composite Index rose 64 points, or 2.73 percent, after
registering the second largest drop in that index's history
yesterday. Meanwhile, the benchmark 30-year Treasury bond rose
1/8 point, pushing down its yield less than a basis point to 5.51
percent.
GDP Effect
For the first two months of 1999, the trade deficit totaled
$36.2 billion, up from $21.8 billion for the same period in 1998,
Commerce Department figures showed.
If March trade figures are also weak, the shortfall could
shave about 2 percentage points from first-quarter gross domestic
product because the trade deficit is subtracted from real final
sales in the GDP calculation formula.
Much the same pattern held last year, when trade
deterioration held GDP growth to 1.8 percent in the second
quarter. ''It's deja vu all over again,'' said Stan Shipley, an
economist at Merrill Lynch & Co. in New York.
Still, with global growth cycles out of whack, the trade
deficit for all of this year could widen to a record $225
billion, said Robert Dederick, an economic consultant at the
Northern Trust Co. in Chicago. ''The U.S. economy is an island of
prosperity and other countries are struggling in an ocean of
stagnation,'' Dederick said.
That combination helped push the deficit to a record $169.3
billion in 1998, reflecting both the first decline in exports in
13 years and vibrant consumer spending.
Economics 101
At the same time, the widening deficit is leading to
increased calls for protection against imports. U.S. steel
companies recently won trade enforcement cases against overseas
steel makers they accused of exporting below cost. The U.S. is
also involved in a trade showdown with the European Union over
bananas, meat and aircraft parts.
In a speech Friday in Dallas, Federal Reserve Chairman Alan
Greenspan said free trade raises living standards around the
world and that he's ''concerned about the recent evident
weakening of support for free trade in this country.''
Analysts said it's a mistake to connect those disputes to
the trade deficit. ''We're getting strong imports because the
economy is so strong,'' said Diane Swonk, deputy chief economist
at Bank One Corp. in Chicago. ''The better the economy is, the
worse trade should be -- that's economics 101.''
After expanding at a 3.9 percent pace the past two years,
the economy is expected to have grown at an annualized rate of
3 percent to 4 percent again in the first quarter.
Unemployment fell to a 29-year low of 4.2 percent in March,
and retail sales posted their largest gain in five years in
February, rising in the first quarter at an annual rate of 14.9
percent, the biggest increase since the third quarter of 1986.
''I don't think the trade deficit is a scary thing,'' said
Marilyn Schaja, a money market economist at Donaldson, Lufkin &
Jenrette in New York. ''It's just a reflection of our success.''
Japan Deficit Widens
The merchandise deficit with Japan, the nation's second
biggest commercial partner behind Canada, widened to $5.3 billion
in February from $4.7 billion during January and $5.3 billion in
February 1998.
The deficit with Asia's newly industrialized countries rose
to $1.8 billion in February from $1.6 billion in January and $885
million during February 1998.
The decrease in the deficit with China is good news for the
Clinton administration's efforts to strike a trade deal that
would enable the Chinese to join the World Trade Organization.
The deficit with Canada, the largest U.S. trading partner,
decreased to $2.4 billion in February. The deficit with Mexico
widened to a record $1.8 billion. The deficit with Western Europe
increased to $2.2 billion.
Higher Oil Prices
Since the data for the February report was gathered, oil
prices have surged, suggesting wider U.S. trade deficits in the
months ahead.
In mid-February, crude oil futures closed as low as $11.37 a
barrel. Today, the contract for May delivery closed at $17.78.
Crude oil prices rose 37 percent in March, boosted by an
agreement among oil-exporting countries to cut 2.1 million
barrels a day of output, or 2.7 percent of world supply.
In February the trade deficit with the Organization of
Petroleum Exporting Countries narrowed to $462 million from $880
million. The U.S. imports more than half its crude oil.
On the other hand, overseas sales by Boeing doubled in
March. That should provide a big boost to U.S. exports. ''The
bottom line is we were expecting a really awful February because
of imports and a slowdown in shipments from Boeing,'' Swonk said.
''We'll get some of Boeing back in March, and it sets us up for
strong second quarter growth.''
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