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U.S. Trade Deficit Worst Since December of 1988 : Economy: There were special circumstances, namely a Boeing strike that cut exports. Even so, a two-year improvement in trade appears stalled.

January 18, 1990|OSWALD JOHNSTON | TIMES STAFF WRITER

WASHINGTON — The nation's persistent trade deficit increased in November to $10.5 billion, its highest level in 11 months, as the aircraft workers' strike at Boeing Co. caused exports of U.S. goods to fall, the Commerce Department reported Wednesday.

Although America's appetite for foreign goods also slackened, the decline was more than offset by reduced sales of U.S. exports, producing the worst monthly deficit since the $10.8 billion logged in December, 1988. November's deficit was up from $10.2 billion in October.

Even discounting the strike's impact, many analysts said they believe that a two-year improvement in the U.S. trade picture has stalled. The annual trade deficit peaked at $152 billion in 1987, then declined to $118 billion in 1988. The 1989 deficit is expected to be about $111 billion.

"The Boeing strike knocked about $1 billion off exports," said Michael Penzer, an economist with Bank of America in San Francisco.

"That's over, and Boeing is going full bore again, and that should help us" with the December trade balance, Penzer said. "But we've seen very slow trade improvement since the second quarter of 1988, and now it looks as though the last quarter of '89 is going to look worse than the rest of the year."

Indeed, the last quarter of last year is shaping up to be a mirror image of 1988, when the last three months showed an average deficit of well over $10 billion, compared to a monthly average of $9.9 billion during the whole year. The deficits for October and November are again running over $10 billion a month, compared to $9.2 billion for the whole year. These year-end bulges have been recorded even though Commerce Department's statisticians adjust monthly trade figures seasonally to try to make up for annual pre-Christmas import bulges.

Total U.S. exports fell to $30.2 billion in November from $31 billion in October, and most of the decline was attributed to the subsequently settled strike at the nation's largest aircraft manufacturer. Exports of airplanes plummeted to $537 million from $1.4 billion in October.

Imports, meanwhile, dipped to $40.7 billion from a record $41.3 billion sucked into the country in October. Even so, November's import total was the second largest ever recorded.

"Boeing cost us about $1 billion in exports, and that explains everything," said David Wyss of Data Resources in Lexington, Mass. "Except for that, (the November deficit) would have been $9.5 billion--which is about what it has been averaging since the middle of 1988. The trade improvement stalled out then and hasn't been going anywhere, and we don't think it is going to improve again until the dollar comes down."

Donald Straszheim, an analyst with the Merrill Lynch investment firm in New York, said the November figures were "disappointing."

He noted that with the domestic economy slowing in the fourth quarter, "you would hope to see fewer imports, and with foreign economies remaining strong, you would hope to see them buy more of our exports. (But) trade progress is becoming very hard to come by."

David Levine of the Sanford C. Bernstein & Co. brokerage in New York cautioned that month-to-month export and import figures are notoriously volatile and should not be given too much importance.

Levine noted, for example, that imports of foreign goods have ballooned from a monthly average of $33.9 billion in 1987 to $39.6 billion last year, an increase of 17%. Yet over those three years, the monthly trade reports showed a monthly decline in imports 14 times in 35 months, six of them last year.

By the same token, U.S. exports soared 43% over the same period, from a monthly average of $21.2 billion in 1987 to $30.3 billion through November last year. During that time, the monthly reports showed nine monthly declines, four of them last year. More significant than the monthly fluctuations is the fact that the basic trend line, as measured by a monthly "moving average" covering three months at a time, showed the smallest monthly deficit of the year last July at $8.8 billion. It then began moving upward again to $9.75 billion in November, the highest level since the beginning of the year.

U.S. industry continued to sell goods at a brisk pace to Western Europe in November. Through November, the year's cumulative deficit with Western Europe was only $1.8 billion, a significant improvement over the $11.3 billion recorded during the same 11 months of 1988.

America's trade balance with Japan was less impressive. Through November, the cumulative deficit was $45.5 billion, little changed from $46.6 billion during the same period the previous year.

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