U.S. Trade Deficit for ’85 a Record : $148.5-Billion Gap Up 20.4% From Previous Year

The U.S. trade deficit widened to a record $148.5 billion in 1985, as imports in December alone outpaced exports by $17.4 billion, the government reported today.

The December deficit itself was an all-time monthly high. For the first 11 months of 1985, the deficit had averaged $12 billion a month.

In advance of today’s report, many economists had said that the deficit may have peaked last year and could head down as imports gradually become more expensive with declines in the value of the dollar.

But the Commerce Department’s merchandise trade report showed that such a turnaround had not materialized by year’s end.

The 1985 trade deficit was up 20.4% from the then-record $123.3 deficit of the year before.

Reduction Expected

At the White House, presidential spokesman Larry Speakes said that even though the nation’s trade imbalance continues to climb, “the combined effect of the declining dollar, coupled with stronger growth prospects overseas, should begin to show a reduction in the trade deficit no later than the second half of this year.”

In all, U.S. imports totaled $361.6 billion in 1985, up 6% from the preceding year. Exports totaled $213.1 billion, down 2.2% from 1984, the report said.

Japan accounted for roughly one-third of the overall deficit. Imports from Japan exceeded exports by $49.7 billion in 1985, up from $37 billion the year before.

The U.S. deficit with Western Europe in 1985 was $27.4 billion, $22.2 billion with Canada, $13.1 billion with Taiwan and $11.6 billion with members of the Organization of Petroleum Exporting Countries.

Car Imports Up 5.9%

Helping to propel the December deficit upward were $4.1 billion in new car imports, up 5.9% from the month before.

Meanwhile, agricultural exports declined in December by 0.22%, to $2.5 billion, while oil imports increased by 10.1%, to $3.5 billion.

In a separate report, the Commerce Department said that the index of leading indicators--the government’s main gauge of future economic activity--rose a sharp 0.9% in December. That was the best showing in 11 months and marked the eighth consecutive gain in the index.

The December advance matched a 0.9% August gain and followed revised increases of just 0.2% in November and 0.6% in October.

Manufacturers Battered

Many private economists cautioned that the big December rise was overstating the current strength of the economy. They noted that U.S. manufacturers are still being battered by soaring trade deficits.

For the year, the index rose 5.8% compared to a slight 0.4% rise in 1984.

The December advance came as seven of the 11 indicators showed strength.

The biggest positive factor came from a surge in building permits. Other positive forces were a big rise in stock prices in December, a rise in the average workweek, changes in the length of time it took to get orders filled, growth in plant and equipment contracts, growth in the money supply and changes in sensitive material prices.