Record U.S. deficit

Press, 1 February 1986, Page 23

Record U.S. deficit

NZPA-Reuter Washington The United States trade deficit soared to a record 5U5148.58 (5NZ282.28) last year, the Commerce Department said, a development likely to renew pressure in Congress to curb imports. The deficit rose more than 20 per cent above: the record of the previous year of $U5123.38 (5NZ234.28). A third of last year’s deficit was with Japan alone —' 3U549.78 (SNZ94 4B). Separately, the depart-.; ment reported that the ; Index of Leading Indicators, a key barometer ofthe economy, rose a healthy .0.9 per cent last month. It followed:a 0.2 November increase and’ suggested stronger growth ahead. But financial markets; had expected the index to go higher and reacted by pushing down the dollar sharply. It fell below 193 yen, the lowest point in seven years. The trade deficit, the excess of Imported goods over exports, was also a record in December, climbing {U517.48 (3NZ338) after a rise of 5U513.78 (sAustl9.2Bß) in November. ; ’ Exports decreased in 1985 for the first time in two years, while imports rose 6 per cent. A strong dollar earlier in the year gave a price advantage to imports over United States goods. , j :■ The trade imbalance i. has held back the econ-t omy’s growth and meant that American producers; have lost a share of their markets to foreign manufacturers ‘•> -

Meanwhile, Mr Henry Kaufman, the influential economist whose forecasts are closely watched on Wall Street, said he believed interest rates would continue to fall. i At a banking conference in New York, Mr Kaufman, chief economist at the Salomon Brothers investment house, also estimated real growth for the United States in 1986 would be about 3.5 to 4 per cent. i The Reagan Administration estimated that >1986 growth would run about 4 per cent. In the fourth quarter of 1985 the Commerce Department reported that, the economy grew at an annual rate of 2.4 per cent. Addressing financial consequences of economic Contraction in some industries, Mr Kaufman said the Federal Reserve, the United States central bank, might have to continue to encourage economic expansion;