Newspaper article THE JOURNAL RECORD

Economists Predict Higher Trade Deficit Will Rise Further

Newspaper article THE JOURNAL RECORD

Economists Predict Higher Trade Deficit Will Rise Further

Article excerpt

WASHINGTON (Bloomberg) -- The United States last year ran up its largest trade deficit in almost a decade and economists are predicting the shortfall could worsen this year as the Asia crisis plays out.

The 1997 trade deficit in goods and services widened 2.4 percent to $113.7 billion. Imports last year surge past the $1 trillion mark for the first time, overwhelming a rise in exports to a record $932.3 billion.

The annual shortfall was the largest since a $115.9 billion deficit in 1988, the Commerce Department said Thursday. Exporters are bracing for reduced spending on U.S. products, ranging from consumer goods to aircraft to food. Malaysian Airline System said last week it wants to delay purchase of 777 jetliners from Boeing. Wireless phone manufacturer Qualcomm warned its earnings will be hurt by canceled Korean orders. And ConAgra reported weaker Asian demand for fresh meat and poultry. "The trade balance will continue to deteriorate for most of 1998" as exports slow and consumer spending gradually tapers off, said Bruce Steinberg, chief economist at Merrill Lynch in New York. "The crisis in Asia is just starting to be reflected in the trade statistics." In December alone, the trade deficit widened to $10.785 billion after narrowing in November to $8.677 billion. December imports rose 3.6 percent to a record $90.804 billion, led by commercial aircraft, consumer goods and autos. December exports rose at a slower pace, climbing 1.3 percent to $80.019 billion, dominated by record shipments of aircraft. The trade deficit with Japan in goods alone widened in December to $5.111 billion from $4.206 billion. For all of 1997, the U.S-Japan shortfall totaled $55.687 billion, up from $47.580 billion in 1996. Treasury Secretary Robert Rubin suggested reform and stimulus packages announced over the past year by the Japanese government haven't succeeded in boosting that country's domestic demand. "If you look at Japan's growth rate, and other indices, it seems to me there's a very large challenge that lies before them," Rubin said. "But it's a very important challenge." Meantime, the U.S. trade deficit with China narrowed in December to $3. …

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