TRADE DEFICIT IN FEBRUARY HIT 6-YEAR LOW GAP NARROWED TO $6.5 BILLION

TRADE DEFICIT IN FEBRUARY HIT 6-YEAR LOW GAP NARROWED TO $6.5 BILLION

A significant drop in oil imports and a strong export showing for manufactured goods drove the U.S. monthly trade deficit in February to its lowest level in more than six years.

The February deficit declined to $6.5 billion from $9.3 billion in January. February's exports were $31.6 billion, down $300 million from the record levels of the previous month, while imports fell $3.1 billion to $38.1 billion.Economists were divided as to whether the improved figures signaled a trend toward a significant narrowing of the U.S. trade deficit, which came to $108 billion in 1989. Even so, the Bush administration was clearly buoyed.

"While monthly trade figures can be volatile, 1990 has begun with an encouraging 11.6 percent increase in exports over the same two months last year," said Commerce Secretary Robert A. Mosbacher.

"It is most encouraging to note that over half of the export increase is in advanced technology products, especially aircraft . . . All things considered, February was a 'good news' month for U.S. trade."

Economists attributed the decline to continued sluggishness in U.S. demand and from a surprisingly strong performance from the export sector.

Personal consumption rose only 0.5 percent in the fourth quarter of 1989, and the forecast is that first quarter 1990 figures, due out next week, will not show much of a gain.

But continuing strong export figures may well offset tepid demand, possibly leading to higher than expected gains in Gross National Product. That may suggest a narrowing of the current account deficit in 1990.

"These figures say much of the pessimistic commentary of 1990 is wrong," said Robert J. Barbera, economist with Shearson Lehman Hutton. "1990 will reflect a major change in the numbers."

Mr. Barbera predicted an improvement in the current account - which includes merchandise trade, services and interest income - to around $80 billion from the still-to-be-revised 1989 level of $105.9 billion.

There was concern expressed in some quarters, however, that increasing U.S. dependence on foreign oil may leave this country vulnerable to radical price swings for crude, and may result in higher deficits in coming months.

Moreover, some economists warned that the dollar's continuing strength against the Japanese yen may reverse the trend of declining deficts with Japan.

"If you look at the deficit with Japan, you'll see it's relatively low in January and February," said Jeffrey Schott, research fellow at the Washington-based Institute for International Economics.

"As a stronger dollar kicks in, you're likely to see stronger Japanese exports. That's one of the warning signs on the horizon."

Most economists stressed that until the United States can narrow its gap between savings, which is about 13 percent of GNP, and investment, about 15 percent of output, the trade deficit will continue to be very high.

"We may come down to $100 billion (from $109 billion in 1989), but I don't think it will narrow much more than that," said David Hale, an economist at Kemper Financial Services Inc. "Unless we can increase our savings rate or cut our investment, I can't build an accounting case for less than that."

A drop in petroleum imports of $1.2 billion from the January level of $5.9 billion was due, in part, to a decline in crude oil prices by an average of $0.74 per barrel.

Manufactured exports for February rose to $23.3 billion from $22.7 billion the previous month. A $1.2 billion gain in the overseas sale of aircraft, thanks to Boeing Co.'s return to full operations after a prolonged strike, was a key reason for the improvement in manufactured exports.

Exports of advanced technology products jumped $800 million in February, to $7.7 billion, while imports fell $300 million from the January figure of $4.6 billion.

The U.S. bilateral deficit with Japan widened to $3.1 billion from $2.9 billion in January. But deficits were trimmed with virtually all other major U.S. trading partners.

Major declines were reported with Brazil, to $100 million from $400 million; with the Organization of Petroleum Exporting Countries, to $2 billion

from $2.6 billion; and with Taiwan, to $700 million from $1.1 billion.

A $1 billion surplus was posted on trade with Western Europe, compared with a $300 million deficit in January.