US trade gap soars to $12.2bn
Exports fell by nearly $3bn and imports rose by $2bn to a record $72.93bn. Trade in goods, rather than services, accounted for most of the damage.
Ron Brown, the US Commerce Secretary, said that the growing trade deficit was a matter of concern. But he said there would be renewed economic vigour in America's trading partners, which would have a ``significant impact'' in cutting the deficit.
Mr Brown said the huge jump from $7.3bn in the red in December to $12.2bn the following month was an ``aberration''. The Commerce Department would investigate whether there were any problems with the adjustment of the figures for seasonal variation, he said.
Nevertheless, in a statement of the obvious, a White House spokesman admitted the sharp jump in the deficit showed the need to open up more overseas markets.
One erratic contribution to the January deficit was a $1bn drop in overseas sales of civilian aircraft. Orders are typically very big, making for volatile figures. But January sales of $524m were the lowest since February 1978.
US exports of capital goods were lower than imports for the first time. This was a watershed, as capital goods - machinery and transport equipment - make up two-fifths of American exports.
US trade with Mexico moved from a small surplus in December to a $863m deficit. Reports from Mexico had already made it clear that the massive devaluation of the peso had cut its imports dramatically.
Last year a tenth of US exports went to Mexico, its fastestgrowing overseas market for goods. The Mexican austerity plan will ensure that the country's demand for US goods will stay depressed.
This was not the only reason for the trade shock, however. America's deficit with Western Europe soared from $206m to $1.3bn in January. This came as a complete surprise, as growth and import demand in most European economies have started to pick up.
A third region with which the US moved deeper into the red was China. The deficit rose by $700m to $2.7bn. Trade with Taiwan, Korea and Hong Kong also took a turn for the worse, although there was a small improvement in the enormous bilateral deficit with Japan. It narrowed to $4.9bn.
Everett Erlich, the Commerce Undersecretary, said Japan would have to open up its markets further. ``I don't think we can talk about the situation being dramatically improved so long as formal structural barriers to trade exist,'' he said.
Mickey Kantor, the US trade representative, said yesterday that there could be an announcement later this week of a date for trade talks with Japan to restart.
There were mixed opinions among economists about how quickly the deficit might improve. Ian Harwood at Kleinwort Benson in London said: ``Demand for US goods in Europe and Japan is likely to improve'' He said they were robust markets, and the weak dollar had enhanced US competitiveness.
Chris Iggo, an economist at Chase Manhattan in New York, said: ``Foreigners have made big inroads into the US market even though the dollar has been falling for 10 years. Americans spend too much and save too little.'' He thought the trend in trade would not improve until the US recovery slowed.
The markets reacted calmly. The dollar drifted against the mark and yen. Wall Street and US government bonds were a little lower by midday.
Britain's balance of payments is expected to swung into the red in the final quarter of last year. Trade in goods showed far bigger deficits in the final three months of 1994. However, British Invisibles expects figures due out tomorrow to show that the surplus on trade in invisibles last year - including services and investment income - was the highest since 1987.
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