NEW YORK -- Hopes for a speedy, export-led recovery dimmed further yesterday, as the government announced that the U.S. trade deficit jumped 24 percent in August and foreign sales fell by their sharpest monthly rate in five years.
The trade figures and a separate report on industrial production showed a becalmed U.S. economy, with the added disappointment of trading partners too weak to buy U.S. goods.
The result is expected to be more of the stagnation that has plagued the economy since it technically pulled out of recession in early 1991, said David Lereah, chief economist with the Mortgage Bankers Association. Any hopes for a strong pickup in the first half of next year must be put on hold, he said.
"The economy stinks and it's going to continue that way for some time," Mr. Lereah said.
Exports had been seen as one of the bright spots in the economy and a locomotive for recovery. In Thursday's presidential debate, for example, President Bush said exports had been "the thing that saved us in this global economic slowdown."
The $9 billion trade gap in August was the highest shortfall in 21 months and up $1.5 billion over July, according to the figures released by the Commerce Department. Exports fell 6.1 percent in August, to $35.51 billion, the sharpest drop since 1987, department figures showed.
A separate report by the Federal Reserve Board showed production from factories, mines and utilities down by 0.2 percent in September, the third decline in four months. As a result, the industrial sector was operating at just 78.4 percent of capacity last month, down from 78.7 percent in August.
Economists had predicted that the weak U.S. dollar, which make U.S. products cheaper overseas, would boost exports. But with overseas economies weak and fading fast each month, even cheap prices for U.S. goods are proving to be inadequate.
"The whole idea of an export-led recovery can't hold up because our trading partners are too weak. The U.S. is coming out of a recession just as our partners are entering one," said Steve H. Hanke, a professor of applied economics at Johns Hopkins University.
The $9 billion deficit was much higher than the $7.4 billion that Wall Street had been expecting. This disappointment helped kill a modest rally of the Dow Jones industrial average yesterday, which slipped 0.27, to 3,174.41.
The trade figures also showed that the weak dollar helped drive down imports, although economists said this decline may also have had much to do with declining consumer confidence. The ABC/Money magazine Consumer Comfort Index, which was released Thursday,showed a drop for the second straight week.
In addition to heralding more stagnation, the figures take away one of the few pieces of good economic news that President Bush has had to counter Gov. Bill Clinton's harping on the poor state of the economy. Mr. Bush has been hailing the country's strong trade performance as a source of high-paying jobs and as evidence that the economy will blossom soon.
HTC Mr. Clinton said yesterday that the sluggish economy might prompt him to speed federal spending on highways and other projects as a way to "bump the economy" forward.
One of the more controversial economic issues in the campaign -- trade with Mexico -- was addressed in the latest figures. Although statistics for the past 12 months show a steady trade surplus with Mexico, the August surplus shrank dramatically, from $627.3 million in July to $175.6 million.
Overall, the trade deficit was running at an annual rate of $77.84 billion in the first eight months of 1992. The total trade deficit for all of 1991 was $65.40 billion.
Automobile exports fell in August by $235 million from July, while foreign sales of tobacco were down by $162 million, chemicals sales drooped by $227 million and pharmaceuticals slumped $110 million.
The production statistics from the Fed showed that manufacturing companies alone cut production in September by percent after a 0.3 percent fall in August and both durable and nondurable goods producers suffered.
Production of expensive, long-lasting durables, such as refrigerators and televisions, tumbled by 0.7 percent after being flat in August. Nondurables, which include goods like clothing and paper products, were stalled at the same level of output in September as in August,when they had dropped by 0.6 percent.
September was the closing month for the third quarter, which ended with a whimper.
"For the third quarter as a whole, industrial production rose at an annual rate of 1.6 percent after growing at a 5.2 percent rate in the second quarter," the Fed said.