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Trade deficit sets record
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April 20, 1999: 1:51 p.m. ET
February's $19.4B gap shatters previous mark of $16.8B set in January
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NEW YORK (CNNfn) - The United States trade deficit reached a record $19.4 billion in February, shattering the mark of $16.8 billion set in January, the Commerce Department reported Tuesday.
The deficit was far wider than the $16.9 billion consensus forecast of analysts surveyed by Reuters.
Imports soared to $96 billion from $93.9 billion, while exports shrank to $76.6 billion from $77.1 billion.
"This is not a fluke," Robert Brusca, chief economist at Nikko Securities, told CNNfn's "Before Hours." "If the U.S. economy is going to continue to have strong growth and the world is going to be weak, we're going to have bigger trade deficits."
The increase in imports came primarily from consumer goods, particularly apparel, toys and sporting gear, the department said. Also contributing were imports in automotive vehicles, parts, engines and capital goods.
Pacing the downturn in exports were capital goods, primarily civilian aircraft. Another major contributor was the food, feed and beverage category, led by soybeans.
The deficit with Japan rose to $5.3 billion in February from $4.7 billion in January. The deficit with China shrank to $4.62 billion from $4.88 billion.
For the first two months of 1999, the nation's trade deficit was $36.2 billion, a 66 percent increase from the $21.8 billion in deficits posted in the same 1998 period.
The sheer size of the deficit makes it difficult to reduce, according to Nikko's Brusca, especially as U.S. businesses rely on funds from overseas to grow.
"The thing that's kind of troubling about the deficit is trade deficits of this size don't go away overnight," he said. "We now are becoming more addicted to foreign capital."
While that's not a problem now, Brusca said, it could become one in the future.
"As the rest of the world begins to recover and capital finds a better home overseas because U.S. bond yields don't look attractive and the U.S. stock markets looks like it fully valued or overvalued, ... (then) money doesn't flow here," Brusca said. "And when money doesn't flow here, it starts to push bond yields up, and that starts to slow our growth and make the stock market look worse, and you start to get into this vicious circle instead of this wonderful circle you're in now."
By mid-afternoon, Treasury markets had rebounded somewhat from where they stood before the 8:30 ET report. The U.S. 30-year bond was down 4/32 to 96-2/32, yielding 5.52 percent; the bond was down 11/32 before the report. 
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