The U.S. trade deficit shrank in June to its lowest level in eight years, but most economists said Friday that the deficit is likely to deepen again at least modestly as the economy improves and consumers begin to satisfy their pent-up appetite for foreign goods.
And the economy is showing more signs of vigor. For example, the Federal Reserve said Friday that industrial production advanced 0.5 percent in July, the fourth monthly gain in a row for the fundamental index.
”It is my view that we are coming out of this recession,” President Bush told reporters at his vacation home in Maine.
The monthly trade figures are often used to gauge the nation`s competitiveness. Only a few years ago they seemed to reinforce the notion that the United States was falling behind other nations. But lately it has been the deficit that is falling.
The June trade deficit fell 16 percent from a month earlier, to $4.02 billion, the smallest figure since June 1983, when the gap was $3.96 billion, according to the Commerce Department.
In the first half of 1991, the deficit-the difference between imported and exported merchandise-accumulated at an annual rate of $60.5 billion, a marked reduction from last year, when the trade gap totaled $101.7 billion.
”It`s amazing,” said Delos Smith, senior business analyst for the Conference Board, an industry-supported research group in New York. ”We basically have the trade situation under control.”
A 3 percent drop in imports, to $38.86 billion, drove the deficit lower in June. Just emerging from the recession, the nation bought much less oil and fewer consumer, industrial and capital goods from overseas. Indeed, only automobile imports from Japan increased.
Exports also slipped, however, as a result of weakening economies abroad and a stronger dollar, which makes U.S. goods less competitive in foreign markets. The U.S. shipped $34.84 billion in goods to other nations in June, down 1.2 percent from May.
Still, Commerce Secretary Robert Mosbacher said he was heartened by the value of June exports, the third-biggest total ever. He noted that in the first half of the year, exports rose 6.5 percent from the year-earlier period. Most economists were less enthused than Mosbacher, however. Although none predicted a vast widening of the deficit, many said they feared that exports are unlikely to gain much more.
Export growth, in fact, has already slowed from double-digit rates last year, and June`s decline would have been bigger except for an $800 million jump in aircraft shipments.
Furthermore, economists said, imports will probably increase as the economy expands.
”As long as the economy continues to recover, the trade deficit is going to be one of the losers,” said Robert Chandross, chief economist for Lloyd`s Bank in New York, who is predicting this year`s deficit at $75 billion.
Some economists said, though, that imports probably won`t resurge. That`s because they believe consumer spending will rise only slightly, reflecting a less-than-reboust economic rebound. As a result, they said, the deficit may keep narrowing.
”We`d be hard-pressed to see a surplus by the end of the year, but I wouldn`t be surprised to see a $2 billion-a-month deficit” by December, said Frederick Sturm, a senior economist at Fuji Securities Inc. in Chicago.
The meager recovery was reflected in the Fed`s industrial production statistic. Despite four consecutive months of rising output and a broad upswing in July, the industrial production index remained well below its year- earlier level.
”The supposed recovery is off to a shaky start,” said Richard Rahn, chief economist for the U.S. Chamber of Commerce, who predicted that a recovery will not come until mid-1992. The recent trends bode well, nevertheless.
Even at $75 billion, the annual trade deficit would be the smallest since 1983, when it was $52.4 billion, and it would be half the record $152.1 billion gap in 1987.
The nation`s biggest deficit in June was with Japan, the gap widening 33 percent, to $3.2 billion. The United States also had deficits with China, Taiwan and Canada.
Meanwhile, it ran surpluses with Western Europe and Mexico. For the first half of the year, the U.S. surplus with the 12-nation European Community was double that of a year earlier.
That is largely due to a new trading pattern with Germany since reunification. Measured in dollars, the United States shipped 16 percent more goods to Germany and bought 6 percent less in the first six months of 1991 than in the comparable 1990 period.
