Record Levels of Exports, Falling Imports Shrinks Trade Deficit 14.9%

WASHINGTON — The U.S. trade deficit shrank 14.9% from April through June, helped by a record high level of exports and the first quarterly decline in imports in three years, the government reported Wednesday.

The Commerce Department said the difference between what America spends and sells abroad narrowed to a deficit of $29.9 billion in the second quarter, compared to a deficit of $35.2 billion in the first three months of 1988.

That was the biggest quarterly improvement in more than five years and continued a trend that began after the deficit hit a record $41.2 billion in the October-December quarter.

For the first six months of this year, the trade deficit, on a balance of payments basis, has been running at an annual rate of $130.2 billion, down almost 20% from the record $160.3 billion deficit suffered in 1987.

Some economists are predicting that the trade deficit will drop by close to 25% for the year as a whole, marking the first annual improvement since President Reagan took office.

“We have had a very good six months for trade. It has taken a long time, but the trade deficit is finally turning around,” said David Wyss, chief financial economist with Data Resources Inc., a Lexington, Mass., forecasting firm.

Democrats have tried to make the country’s soaring trade deficits in the 1980s a campaign issue, but Republicans are hoping the voters will focus instead on this year’s improvement, which has made U.S. manufacturing one of the standouts of the economy.

The new figures confirmed an improvement already evident in the department’s monthly merchandise trade reports. Those figures showed the trade deficit declining 12.8% to $32.6 billion in the second quarter.

Economists generally give the quarterly report more credence than the government’s monthly trade figures, which are more widely known.

“It’s a more honest reflection of what’s happening to the underlying trade balance,” said economist Frank McCormick of Bank of America.

Wednesday’s figures are smaller because they subtract such factors as shipping costs and military sales from the monthly numbers.

The new report said that imports edged down 0.8% to $109.6 billion in the April-June quarter, the first quarterly decline since the first three months of 1985. While imports of petroleum products were up by 2.6% to $10.2 billion, non-oil imports fell 1.1%, reflecting a big drop in car shipments as Americans began to balk at higher sticker prices caused by the weaker dollar.

Foreign car imports from countries other than Canada fell by 12% in the second quarter, led by a 25% decline in shipments from West Germany. South Korean car shipments fell by 19% while Japanese car imports were down 7%.

Average prices for German cars shot up 21% in the second quarter while the average price of Japanese cars rose by 3%.

U.S. exports climbed 5.8% to a record $79.7 billion in the second quarter, reflecting in part a 48% surge in U.S. aircraft sales.

Agricultural exports were up as well, climbing 7% to $9.7 billion, the highest level since the second quarter of 1984.

Corn sales climbed 27%, with much of the gain attributed to increased sales to the Soviet Union and Mexico. Wheat sales were up 10% due to an increase in sales to China while meat and poultry shipments rose 28%, largely due to increased Japanese purchases.

Soybean and wheat prices both rose 13% while corn prices were up 7%. Analysts said even larger price increases would be seen in coming months since the spring advance did not reflect the summer drought.

The trade deficit decreased with every major geographic area except for Canada, the country’s largest trading partner, where the imbalance climbed by $500 million to $4.1 billion.

The country’s largest deficit, as usual, was with Japan, an imbalance of $11.9 billion, down $1.1 billion from the first quarter.

The deficit with Latin American decreased $1.5 billion to $1.7 billion while the deficit with Western Europe fell $900 million to $3.8 billion. The deficit with the newly industrialized countries of South Korea, Taiwan, Singapore and Hong Kong declined $700 million to $6.1 billion.