Trade Deficit Cut to $11.5 Billion in Month
The U.S. trade deficit narrowed to $11.5 billion in October, a sharp improvement from a record September imbalance and a signal, some analysts said, that the country’s darkest trading days may be ending. In September, the difference between imports and exports was $15.55 billion.
The Commerce Department said that imports totaled $28.82 billion last month, down 13.4% from September, while exports dipped a slight 2.1% to $17.37 billion.
The drop in imports came from a 30.4% plunge in shipments of foreign cars last month. The steep fall reversed a big rise in September car imports that came at the end of a two-month strike by auto haulers, which had disrupted normal delivery schedules.
Nibbling Away at Deficit
Even after discounting autos, imports of a wide variety of manufactured goods were down in October, prompting many analysts to say the disastrous plunge in U.S. trade may finally have hit bottom.
“The good news is that the bad news isn’t getting worse,” said economist John M. Albertine, president of the American Business Conference, a coalition of high-growth companies. “Here and there we are beginning to see signs that the softening dollar is starting to nibble away at our trade deficit.”
But analysts emphasized that, while the deep slide in the country’s trade performance may have stopped, it will probably be mid-1986 before much improvement is noted.
“We have stabilized, and the worst of the trade deficit is over,” said David Wyss, economist for Data Resources, a private forecasting firm. “But it will still take until next spring before we start to see significant declines in the deficit.”
May Top $150 Billion in Year
The deficit for ’85 is expected to top $150 billion, far above last year’s record $123.3-billion imbalance. Wyss predicted that the 1986 deficit might drop slightly to $140 billion. This small swing would be enough to add about 1 percentage point to the economy’s overall growth rate next year, he said.
The country’s disastrous trading performance has been blamed on the high value of the dollar, which makes U.S. goods more expensive and harder to sell abroad while making imports cheaper and more attractive to Americans.
While the dollar began declining last March, many analysts believe that further declines are needed to make U.S. industry competitive again.
Commerce Secretary Malcolm Baldrige said that, “so far this year, the United States has trade deficits with nearly all major areas and countries of the world. . . . Greater efforts are required to put the deficits on a declining path.” He said these efforts should include congressional action to slash budget deficits and increased modernization by U.S. businesses.
U.S. exports continued to languish in October, falling to the lowest monthly level since February, 1984. U.S. agricultural sales rose 5.1% in October to $2.26 billion, but exports of manufactured goods declined almost 3% to $11.8 billion.
The improvement in the October deficit came although oil imports rose 2.4% last month to a total of $3 billion.
Drop in Car Imports
Oil imports averaged 5.5 million barrels a day last month, down slightly from the September pace, but the price per barrel rose to $26.88 in October, up 26 cents from September.
The rise in the cost of oil was more than offset by the steep drop in car imports, which fell to $2.8 billion in October from $4 billion in September. Car imports from Japan fell 44.2% to $1.1 billion.
This helped shave the U.S. trade deficit with Japan to $3.2 billion, down from a record $5.1 billion in September. This was still the largest U.S. deficit with any country and left the imbalance with Japan running at an annual rate of $48 billion for the first 10 months of the year.
The next biggest deficit was with Canada and the European Common Market countries, both running at annual rates of $21 billion.
