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U.S. trade gap sets record
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May 20, 1999: 4:35 p.m. ET
March imports shatter previous mark; deficit surpasses analysts' estimates
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NEW YORK (CNNfn) - The trade deficit rose to a record $19.7 billion in March due to strong demand at home and weakness overseas, the government said Thursday, heading the United States for its worst trade performance ever in 1999.
While exports grew to a record $77.52 billion in March, the first rise since last October, it wasn't nearly enough to offset the record $97.22 imports absorbed by the booming American economy during the same period, the Commerce Department said.
Shipping lines brought more cargo to America than they took away during March
Once again, the nation's expanding trade imbalance with Japan contributing most heavily to the overall deficit, which was up from a revised $19.5 billion export shortfall during February.
Commerce Secretary William Daley said he expected a record deficit for all of 1999 and another monthly record in the April data.
"I would imagine that it (the 1999 deficit) will be a record and next month's will probably be a record," Daley told reporters in Washington. The deficit jumped 53 percent to $168.6 billion last year, the highest in U.S. history, as exports fell for the first time in 13 years while imports grew 5 percent.
Economists said the March deficit, which topped analysts' forecasts of $18.1 billion or so, would act as a drag on the economy and might sway Federal Reserve policy-makers not to raise interest rates anytime soon. The central bankers on Tuesday changed their stance from neutral to one leaning toward raising short-term rates.
"In the bigger picture, the trade deficit will act as a substantial drag on growth. It will take some pressure off the Fed to raise rates," Thomas Carpenter, chief economist at ASB Capital Management, told Reuters.
Analysts said they would cut their estimates of first-quarter growth by at least half a point. The government late last month said the economy grew at a 4.5 percent rate in the first quarter, down from the blistering 6 percent pace in the fourth quarter but still well above the 2 to 3 percent that most economists say can be sustained without kicking up inflation.
The government is due to revise its first-quarter estimated on economic growth next week and again next month.
Daley said that autos and auto parts accounted for 40 percent of the increase in the trade gap in the first quarter, the single largest factor in the deficit's rise from a year earlier.
The trade gap with Japan, America's third-largest trading partner, reached $6.49 billion in March, the highest such total since a $6.6 billion imbalance during October 1994. Overall exports to Japan reached $5.29 billion, up from $4.79 billion in February, while imports jumped to $11.78 billion, a sharp rise from $10.06 billion the month before.
Closer to home, the U.S.-Mexico trade deficit also hit an all-time high of $2.53 billion in March, up from $2.01 billion the month before. The trade gap with Canada, the nation's largest trading partner, widened as well, reaching $2.41 billion in March after a $2.25 billion imbalance in February.
On a more positive note, the trade imbalance with China eased somewhat to $4.14 billion in March from $4.62 billion in February.
-- from staff and wire reports
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Commerce Department
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