High Oil Prices Fuel Increase In Trade Deficit Imports, Exports Hit Records As Gap Widens 7.7 Percent

The highest oil prices since the Persian Gulf War helped widen the U.S. trade deficit as imports and exports climbed to record levels.

The Commerce Department reported Thursday that the deficit in goods and services rose 7.7 percent in April to $8.63 billion, after a March imbalance of $8.01 billion.

The Clinton administration, under heavy fire from Republican critics for an ever-widening trade deficit, played down the April increase in imports and stressed instead the growth in exports. It offers proof, spokesmen said, that President Clinton’s emphasis on market-opening trade deals is paying off.

“Today’s numbers are just one example of a broad spectrum of recently released data showing a healthy economy,” Commerce Secretary Mickey Kantor told reporters. “The U.S. economy is continuing to expand and provide increasing opportunity for American workers.”

Kantor noted that the April deficit was 20 percent lower than the same month in 1995. Private economists, however, were not as impressed. They said that while there was a narrowing of the deficit from horrendous levels in early 1995, the improvements have stalled out in recent months.

“We are now stuck in a range of monthly deficits of between $8 billion and $9 billion, where we have been since last fall,” said Lawrence Chimerine, chief economist at the Economic Strategy Institute in Washington. “Analysts who had been counting on additional declines in the deficit to spur U.S. economic growth this year are going to be disappointed.”

So far this year, the trade deficit is running at an annual rate of $98.9 billion, only a slight improvement from the seven-year high of $105.06 billion imbalance of 1995.

However, two other reports Thursday did show strength in the economy. The Labor Department said new claims for unemployment benefits fell by 4,000 last week to 357,000, the first decline in four weeks.

And a survey of business conditions done by the Federal Reserve Bank of Philadelphia showed that economic activity rose significantly in June, with the lag between when goods are ordered and when they can be delivered rising sharply.

Marilyn Schaja, an economist at Donaldson, Lufkin and Jenrette in New York, said she believed this Fed survey was “one more reason to expect the Fed to tighten” when central bank policy makers next meet on July 2-3.

The trade report showed that imports of goods and services rose 1.7 percent in April to a record high of $78.57 billion, reflecting the jump in oil prices and volume and higher shipments of foreign cars.

Petroleum imports soared 30 percent to $5.85 billion as the average price for a barrel of crude surged to $19.33, the most expensive since the start of the Persian Gulf War in January 1991. The price was $17.33 in March, but analysts noted that world oil prices already retreated from their peak levels as supplies increased.

Imports of autos and auto parts rose 4.6 percent to $10.51 billion in April.

U.S. exports of goods and services also set a record during the month, climbing 1 percent to $69.94 billion, reflecting higher sales of commercial aircraft and consumer products.

In a separate report, the Commerce Department said Thursday that the first-quarter deficit in the U.S. current account rose to $35.6 billion, a 16.9 percent increase from the fourth quarter of 1995. The current account is the broadest measure of U.S. trade because it includes not only the goods and services covered in the monthly reports but also investment flows and foreign aid payments.

In the monthly trade report, the overall deficit with Japan edged down 0.2 percent in April to $4.1 billion. But the deficit with China climbed 28.9 percent to $2.34 billion.

The U.S. deficit with Mexico also rose sharply, rising 38.2 percent to $1.56 billion.