US trade gap soars by dollars 59bn

THE US current account deficit, the broadest measure of the country's trade relations with the rest of the world, leapt last year by almost dollars 59bn as 1991's extraordinary foreign contributions to the costs of the Gulf war faded from the picture, and a depressed international economy eroded demand for American exports.

According to final 1992 figures from the Commerce Department, last year's deficit reached dollars 62.5bn against 1991's artificially low dollars 3.7bn, but still well below the dollars 90bn recorded in the previous 'normal' year of 1990.

But the enlarged deficit contained its own evidence of the gathering recovery in the US, which the widely respected University of Michigan forecasting unit yesterday predicted would produce 3.2 per cent growth this year. In the final quarter of 1992 the deficit jumped to dollars 22bn, more than dollars 6bn more than in the previous July-September period, as increasingly buoyant domestic demand produced a surge in foreign imports to the US.

Much the same picture emerges from the latest data on housing starts, a key barometer of the vitally important construction industry. After a steep decline in January, February's data released yesterday showed a 2.5 per cent rebound, with gains in every region except the South.

With long-term bond yields and mortgage rates at their lowest levels in decades, analysts expect the housing market to provide strong support for the economy at least through 1993. Indeed, the steady, if unspectacular, recovery has led conservative Democrats in Congress to press President Clinton to drop part or all of his planned dollars 16.2bn short-term stimulus package for 1993, arguing that recovery makes such a boost superfluous.

Meanwhile, Lloyd Bentsen, Treasury Secretary, yesterday asked Congress to approve a further dollars 45bn to complete the clean- up of the savings and loan crisis of the late 1980s. If approved, this would bring the final cost of the S&L collapse for the federal government to about dollars 200bn.