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Trade gap narrows 9.6%
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February 19, 1999: 10:37 a.m. ET
Deficit dropped unexpectedly in December but set record for 1998
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NEW YORK (CNNfn) - The trade deficit fell unexpectedly in December but still set a record for all of 1998, the government said Friday, as economic turmoil overseas hurt demand for U.S. exports.
The deficit in goods and services fell 9.6 percent to $13.79 billion from a revised $15.26 billion in November, the Commerce Department said. Imports fell 2.1 percent to $92.28 billion while exports edged down 0.6 percent to $78.50 billion.
Wall Street analysts had forecast a December trade gap of about $15.8 billion, Reuters reported.
The drop in the deficit, and a relatively small decline in exports last month, could mean the worst is over for U.S. exporters hurt by weak demand abroad, analysts said.
"The numbers recently are suggesting that we're closer to absorbing most of the impact we've seen from Asia," Michael Moran, chief economist at Daiwa Securities, told CNNfn.
In a separate report, the Labor Department said that inflation at the retail level was virtually absent last month. The Consumer Price Index, the government's main inflation gauge, edged up 0.1 percent in January, less than Wall Street forecasts for a 0.2 percent increase.
The trade picture for all of 1998 was less bright, as the deficit jumped 53 percent to a record $168.6 billion from $110.2 billion in 1997, surpassing the previous record of $153.3 billion set in 1987. The turmoil in Asia and Russia as well as sluggish growth in Europe hurt exports, which fell 0.7 percent to $931.31 billion.
Meanwhile, imports grew 5 percent to $1.10 trillion last year as the strong domestic economy sucked in imports from countries trying to export their way out of their economic problems.
The economy grew 3.9 percent in 1998, an unexpectedly strong performance, and analysts said the drop in the December trade gap could mean growth was even stronger than the government's initial estimate.
Investors showed little reaction to the reports. Stocks were mixed, the yield on the 30-year Treasury was little changed at 5.38 percent, and the dollar edged higher against major currencies.
The deficit in manufactured goods jumped 25 percent to a record $248.0 billion last year while the surplus in services trade fell 9.5 percent to $79.4 billion, the department said. The United States typically runs a deficit in merchandise trade and a surplus in services trade. 
-- from staff and wire reports
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