Service surge helps shrink trade gap 29%

WASHINGTON The United States recorded its best trade performancein almost six years from July through September as the deficit in thebroadest measure of trade shrank 29 percent to $22.69 billion, theCommerce Department reported Wednesday.

The current account deficit narrowed by $9.40 billion from asecond-quarter imbalance of $32.08 billion, reflecting a big jump inthe overseas earnings of U.S. companies.

But economists discounted the huge swing, saying it did nothingto change their view that America's trade deficit will remain stuckat a high level through most of the next decade.

The current account, also known as the balance of payments, isthe most important trade statistic because it measures not only tradein merchandise but also trade in services, which includes investmentearnings between countries.

For the third quarter, the services category registered asurplus of $8.72 billion after posting a $1.66 billion deficit fromApril through June, the first services deficit in three decades.

But the services swing from deficit to surplus was attributedalmost totally to changes in the value of the dollar. In the thirdquarter, the dollar was declining, meaning that the profits U.S.companies earn in foreign currencies were worth more when they weretranslated into dollars.

In the second quarter, a rising dollar had eaten into theprofits Americans companies were earning in foreign currencies.

The big swing in services helped offset a small increase in themerchandise trade deficit, which climbed 0.7 percent to $27.75billion in the third quarter, and a rise in foreign aid and pensionpayments, the other category of the current account, which climbed to$3.66 billion, an increase of 27 percent.

Analysts forecast that the merchandise trade deficit will remainat stubbornly high levels in coming years and predicted that theservices account will dip permanently into deficit sometime early inthe 1990s, reflecting the fact that the U.S. is now the world'slargest debtor nation.

As residents of a debtor nation, Americans hold less in overseasassets than foreigners hold in U.S. assets. America's net debtorposition stood at $532.5 billion at the end of last year and isexpected to worsen by an additional $100 billion this year.