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STRONG DOLLAR FUELS RISE IN TRADE GAP TO $30.7 BILLION

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The broadest measure of the U.S. trade deficit rose 7 percent to $30.7 billion in the first quarter of 1989 as a strong dollar cut into income from foreign investments, the Commerce Department reported Friday.

But the deficit for the fourth quarter of 1988 was revised down from $31.9 billion to $28.7 billion - the smallest shortfall since a $27.6 billion gap in the third quarter of 1985, the department's Bureau of Economic Analysis said.The current account is the most complete trade statistic because it includes both merchandise trade and services, primarily the flow of investments between the United States and its trading partners.

The current account deficit widened in 1989's first quarter despite improvements in the deficit for merchandise trade, which fell to $27.6 billion from $32 billion, the bureau said.

Exports rose to $88.5 billion from $83.7 billion as both agricultural and non-agricultural exports increased strongly. Imports climbed to $116.1 billion from $115.7 billion with higher prices for petroleum included in the advance.

However, net service receipts were only $400 million in the first quarter compared with $8.4 billion in the quarter before. The bureau said a sharp decline in income on U.S. investments abroad related to the stronger dollar accounted for virtually the entire drop in service receipts.

The services component slipped into the red during the second quarter of 1988 for the first time in 30 years. While U.S. merchandise trade has been running in the red since 1975, investment earnings had been strong enough to push the current account balance into the black as recently as 1981.

-RETAIL SALES ROSE a sluggish 0.1 percent in May, held down by a big decline in department store revenues and a slowdown in the movement of automobiles off dealer lots, the government said Tuesday.

Sales climbed to a seasonally adjusted $141.1 billion last month after rising 1 percent in April, the Commerce Department said. The April figure had been revised upward from 0.4 percent. Sales had fallen 0.4 percent in February and risen 0.1 percent in March.

Auto sales slowed to a 0.2 percent rise in May following a strong 2 percent rise in April. In both months, carmakers had offered incentives such as rebates and low interest rates to lure buyers into showrooms.

Excluding the automotive category, sales rose 0.1 percent following a hike of 0.7 percent in April and a 0.1 percent decrease in March.