THE US trade deficit narrowed an unexpected 19 per cent in March, thanks to a $700 million surge in aircraft exports, but the performance was clouded by widening gaps with China and Japan.
The goods and services deficit shrank to $8.5 billion in March from a revised $10.5 billion in February, defying predictions from Wall Street analysts who had anticipated a deficit of $10.1 billion.
The Commerce Department said the March figure, the best monthly result since November, reflected sharp gains in exports of capital goods, notably civilian aircraft, and industrial supplies.
But analyst Mr Brian Horrigan at Loomis Sayles in Boston cautioned that aircraft sales were a very volatile category". "It's a warning, because typically if it goes up one month it goes down the following month. And this suggests that exports may be very weak in April and that the trade deficit will expand again."
Exports in March increased 4.1 per cent to a record $76.5 billion, eclipsing growth in imports of goods and services, which posted a 1.2 per cent gain to $85 billion - also a record.
While the March trade balance was positive, the trend for the year remains worrisome, analysts said.
In the first three months of 1997, the deficit widened to $31.4 billion, up from $24.6 billion in the same period of 1996.
Asked to characterise the current trade picture in light of the March figures, Mr Robert Scott of the Economic Policy Institute said: "I think we have to be very careful."
He noted the volatility in the aircraft and computer sectors, described as "upticks", in March, as well as the strength of the dollar which makes US exports more expensive and less attractive.
"Even despite the recent decline in the dollar, it is still up an average 5 to 6 per cent over its average in 1996," he said.
"Unless the dollar falls very sharply and very quickly, it's clear we're going to see a merchandise deficit of $200 billion (this year) and a goods and services deficit exceeding $140 billion." The March deficit with Japan grew to $4.61 billion from $4.26 billion in February and $4.11 billion a year earlier.
"With domestic spending weak in Japan but robust in the United States, plus the fact that until very recently the dollar was getting stronger against the yen, the deficit (with Japan) got larger," according to Mr Horrigan.
The shortfall is unlikely to improve this year, as growth in the Japanese economy - and its capacity to boost imports - is expected to be curbed by fiscal austerity measures, he added.
Washington has likewise been anxious about the growing deficit with China, which is soon expected to overtake that of Japan.
While the shortfall shrank in March to $2.59 billion from $3.34 billion in February, it totalled $9.64 billion for the first three months of the year compared to $6.99 billion in the same period of 1996.
