Yawning gap in US trade pushes deficit deeper

THE United States trade deficit won't go away.

Instead, the Commerce Department reports that the gap between imports and exports grew from December to January. The worsening took place despite the fact that the government included services in its report for the first time. The US has a surplus in services.

According to the government report, the January deficit, including services, was $6.3 billion compared to a December deficit of $4.15 billion. The main reason for the jump was a drop in exports, particularly aircraft and telecommunications equipment.

``The January numbers show that the deficit is still a chronic problem,'' says economist Robert Dederick of the Northern Trust Company in Chicago. However, Mr. Dederick points out that although the deficit widened, it remained at about the same level as October and November. ``It appears to be flattening out at a higher level,'' he says.

Economists are not surprised that the trade deficit remains large. The US economy is one of the most vibrant. Thus, the US is like a magnet for foreign goods. The trade deficit with Japan dropped slightly, but David Wyss, an economist with DRI, an economic consulting firm in Lexington, Mass., says, ``Every Congressman will be pointing to these numbers as a sign that we need to bash Japan harder.''

The merchandise trade numbers continue to reflect slow economic growth abroad, dampening US exports, which fell by 6.4 percent in January. Both the Japanese and German economies are struggling. The Mexican economy is emerging from near-recession. ``That's part of the problem with Japan, no one is buying. Their economy is soft and ours is strong,'' Mr. Wyss says.

However, there are some signs of life in the French economy. And, Britain and Canada are growing. The Australian and New Zealand economies are now among the strongest. Unfortunately, the Down Under economies are too small to make much of a dent in the US trade numbers.

The US figures could actually get worse next month. The frigid February weather in the northeast bolstered oil imports. However, the price today is $7 per barrel below a year ago. ``I think we'll see some price tightening this spring and some next year as well,'' Wyss predicts. This would help to boost the economies of members of the Organization of Petroleum Exporting Countries, which have traditionally been big buyers of US exports. Higher prices would help the Mexican economy, a benefit for the US trade picture.