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Saturday, Jul. 18, 1998
U.S. trade deficit hits record high
Asia's economic woes hurt export numbers
By MARTIN CRUTSINGER
Associated PressWASHINGTON - America's trade deficit widened to a record $15.75 billion as deepening economic troubles in Asia cramped U.S. exporters' ability to sell everything from apples to autos.
The Commerce Department reported Friday that the trade deficit for May was 10.3 percent higher than the April imbalance of $14.27 billion. It was the fourth straight month that the trade deficit, which occurs when imports outstrip exports, has hit a record high.
The severe deterioration is occurring because of the year-old Asian currency crisis, which has engulfed Japan and a number of smaller countries in severe recessions in a part of the world that accounts for one-third of American export sales.
The swelling trade deficit is coming at a time when U.S. economic growth was already slowing. Economists said an outright recession cannot be ruled out, especially if Japan, the world's second-largest economy, does not soon escape from its own worst recession in 50 years.
``Asian turmoil is taking a huge toll on U.S. growth,'' said Bruce Steinberg, chief economist at Merrill Lynch.
Steinberg said he now believes that overall output of goods and services actually shrank at an annual rate of 1 percent in the April-June quarter, a startling turnaround from growth of 5.4 percent in the first quarter. The economy has not seen output decline since the end of the 1990-91 recession.
David Wyss, an economist at Standard & Poor's DRI, said he believed the economy eked out a weak growth of 1 percent in the spring. But he conceded that that be too optimistic, given the impact not only of Asia but the prolonged General Motors' strike and a huge overhang of unsold goods that has cut into production.
``The numbers are coming in weaker than we thought and the trade deficit is going to get worse before it gets better,'' Wyss said.
For May, total U.S. exports fell to their lowest level in 15 months while sales of farm goods, which have been hurt not only by slumping demand but falling prices, declined to their lowest point in nearly four years.
Investors, who are hoping the Asian troubles will keep the Federal Reserve from boosting interest rates to fight inflation, pushed stocks further into record territory Friday. The Dow Jones industrial average closed at 9,337.98, up 9.79 points.
President Clinton, who has been battling Congress all year for $18 billion in additional U.S. support to replenish depleted reserves at the International Monetary Fund, said Friday's bad trade figures should goad policy-makers into a ``disciplined'' response.
``We need to restore growth in Japan, restore growth in Asia, and our major goal here for our own actions should be to pay our fair share to the International Monetary Fund so we can support economic recovery,'' he told reporters.
Clinton's campaign for IMF money gained headway this week when House opponents conceded the administration appeared on the verge of winning.
The administration, concerned that the swelling trade deficit could lead to a protectionist backlash, has been stepping up pressure on Japan to do more to deal with its economic troubles.
Japanese Prime Minister Ryutaro Hashimoto announced on Monday he was resigning after his party suffered a sharp setback in parliamentary elections. Two of the front-runners to succeed Hashimoto came out Friday in favor of bigger tax cuts, something the United States has been advocating to jump-start Japan's economy.
Commerce Secretary William Daley said the administration was optimistic the new prime minister will read the election results and ``take the steps that, not only the United States, but other parts of the world have been advocating.''
For May, the deficit with Japan narrowed by 8.5 percent to $4.95 billion, the smallest imbalance since January. But for the year, the deficit with Japan is running 18 percent above the same period a year ago.
The deficit with China rose by 8.3 percent in May to $4.63 billion, the highest level since last October as U.S. exports continued to slide.
So far this year, U.S. exporters have seen sales plunge 45 percent to South Korea, 51 percent to Indonesia and 27 percent to Thailand, the three countries hardest hit by the financial turmoil.
In addition to the drop in farm products, sales of American cars fell by $488 million in May, telecommunications equipment exports dipped by $275 million and demand for American-made computer chips fell by $133 million.
The widening overall deficit in May reflected a 1.2 percent drop in U.S. exports of goods and services, which fell to $76.23 billion, and a 0.5 percent rise in imports, which climbed to $91.98 billion, the second highest level on record.
The rise in imports would have been even worse except for the fact that falling world oil prices have held down America's foreign oil bill. For May, oil imports totaled $4.4 billion, down $182 million from April.Post your comments about local news eventsFront Page || Main Index || News || Business || Texas || South Texas Outdoors || Birdwatching || Sports || Entertainment || Selena || Education || South Texas Attractions || World Wide Web