ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, December 11, 1996 TAG: 9612110029
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: Associated Press
America's trade deficit skyrocketed to a record $48 billion as demand for oil and other foreign goods continued to increase while U.S. exports fell for the first time in three years.
The imbalance in the U.S. current account rose 19.3 percent during the July-September quarter, with all major categories of trade showing weakness, the Commerce Department reported Tuesday.
``Right now the current account is hemorrhaging and trade is proving to be a major constraint on the U.S. economy,'' said Mark Zandi, an economist at Regional Financial Associates, a West Chester, Pa., forecasting firm.
The current account is the broadest measure of U.S. trade, covering not only exports and imports of goods, but also services such as tourism and investment flows.
Private analysts said it was particularly worrisome that growth of U.S. merchandise exports faltered in the third quarter, dipping by 2.1 percent.
It was the first quarterly setback for export growth since mid-1993. Analysts said the weakness was likely to persist into 1997, given the rising value of the dollar, which makes American goods more expensive overseas, and continued economic weakness in major U.S. markets.
``This drag on trade is coming at a bad time, when the economy is already slowing,'' said Lawrence Chimerine, chief economist at the Economic Strategy Institute.
The overall economy, as measured by the gross domestic product, slowed to a 2 percent growth rate in the third quarter, and many analysts believe the fourth quarter could be even weaker. Without the widening trade deficit, GDP would be a full percentage point higher now, analysts said.
David Wyss, an economist at DRI-McGraw Hill Inc., predicted that the current account deficit would set a record this year just above the old mark of $166 billion set in 1987 and would surge even higher to $201 billion in 1997. The current account deficit totaled $148.2 billion in 1995.
The drop in exports and a 0.7 percent rise in imports, reflecting in part higher oil shipments, pushed the deficit in goods up 9.8 percent to $51.6 billion.
America also suffered a 7.8 percent increase in the deficit in investment earnings to $4.7 billion, reflecting big increases in payments to foreigners holding U.S. Treasury securities.
The category that includes foreign aid payments also increased in the third quarter, by 0.6 percent to a $9.42 billion deficit.
Offsetting these deficits, America as usual had a surplus in services - items such as airline tickets and royalty payments. But the $17.8 billion services surplus was down 3.5 percent from the second quarter.
The $48 billion third-quarter current account deficit was the largest in history, surpassing the old mark of $43.2 billion set in the fourth quarter of 1987.
LENGTH: Medium: 59 lines ILLUSTRATION: GRAPHIC: Chart by AP. color.by CNB