America’s trade deficit in February narrowed to $10.4 billion, after setting a record the previous month, the Commerce Department said late Thursday, after correcting a sizable error that had overstated the trade gap.
The department had originally reported the February deficit was $1.2 billion larger, at $11.6 billion, before discovering a major miscalculation of oil imports.
Commerce Undersecretary Everett Ehrlich called the size of the error unprecedented and blamed it on miscommunication between his agency, which compiles the trade statistics and the Customs Bureau, which gathers the raw data.
Customs, in an effort to get a handle on late reports of oil shipments coming into the country, asked its agents to send in not only the current month’s data but data from previous months.
However, the Census Bureau, the arm of Commerce that tabulates the trade statistics, was not alerted to separate the old data from the current month, resulting in a $1.2 billion overstatement of oil imports on a seasonally adjusted basis.
Red-faced Commerce officials said it would take at least a day to come up with corrected tables for all the information contained in the 29-page trade report.
Based on the corrected information, the department said the February imbalance was an 18 percent improvement from January’s deficit of $12.7 billion. The January gap between imports and exports had been the largest since the government switched to tracking goods and services flows on a monthly basis.
Even with the lower figure for February, the deficit so far this year is running at an annual rate of $139 billion, up sharply from last year’s $114.3 billion deficit.
Economists blamed the deterioration on two major factors - the surprisingly strong U.S. economy compared to much weaker growth overseas, and the strength of the dollar, which is making foreign goods cheaper for American consumers.
Asked about the Commerce error, economist Michael Penzer of the Bank of America in San Francisco said the government was lucky the trade deficit is not a current focus for financial markets.
He said even though the erroneous deficit number was $1 billion higher than expected, the markets basically ignored the report and focused instead on other reports Thursday.
Those reports, including an increase of 8,000 in the number of weekly unemployment claims filed, signaled to investors that the economy may be starting to slow, easing pressure on the Federal Reserve to raise interest rates to fight inflation.
In a warning that President Clinton may adopt a more protectionist stance in his second term in response to the growing deficits, Commerce Secretary William Daley on Thursday pledged a renewed push to attack unfair foreign trade barriers.
“We are happy to help break down barriers, happy to lead the way in opening markets … but we will not be a vehicle for one-way trade,” Daley said in what was billed as his first policy speech on trade.
During the first two months of this year, the deficits with both Japan and China are running far beyond their levels of a year ago.
The two-month total for China was up a dramatic 37 percent from a year ago, and the deficit for Japan for the year is 11.3 percent higher. U.S. automakers are complaining that the strong dollar is allowing Japanese competitors to regain market share in the United States.
The dollar has risen 55 percent against the yen since hitting its low point two years ago, and Sung Won Sohn, chief economist at Norwest Corp., said the problems being faced by automakers were already spreading to computer companies and other U.S. manufacturers.
So far, however, the administration has stopped short of mounting a coordinated market intervention effort with U.S. allies to dampen the increase.
Total U.S. exports of goods and services in February were up 4 percent to an all-time high of $73.5 billion. Imports, after correcting for the oil reporting error, totaled $83.9 billion, also a record.