Despite the decline in the value of the dollar on international currency markets, the nation's trade deficit leaped to a record $16.5 billion in January, the Commerce Department reported Friday.
Economists expressed surprise that American sales abroad have not improved significantly in the last year, with the dollar falling 20% in relation to foreign currencies. The falling dollar reduces the price of U.S.-made goods purchased abroad in foreign currencies--and at the same time makes imports more costly for Americans.
"We should not expect a real improvement in the trade balance until the last half of this year," warned Commerce Secretary Malcolm Baldrige. "It will take that long for the impact of the lower dollar to shift demand toward Americans goods."
'Cushion' of Profit
However, foreign producers have a "cushion" of profit and can afford to hold the line on prices to maintain sales, said Jay Rechter of Evans Economics, a Washington consulting firm. In addition, he said, many customers "like the quality of foreign products" and do not want to switch to American goods.
The hope that a falling dollar will revive U.S. manufacturers has caused disagreements among the nation's top economic policy makers.
Baldrige and other Reagan Administration officials want the dollar to decline even more, arguing that it would spur the sales of American merchandise. But Federal Reserve Board Chairman Paul A. Volcker warns that the resulting rise in the price of imports--which would also ease price pressure on American firms--would contribute to a resurgence of inflation.
A 10% drop in the value of the dollar can add a percentage point to the inflation rate, economists believe. But inflation has not yet accelerated because of the decline in oil prices.
"We are now beginning to see some of the price increases reflecting the fall in the value of the dollar," said Richard M. Young, vice president of Chase Econometrics, a forecasting firm in Bala Cynwyd, Pa. "Only after a while will we reduce the amount we buy."
Slight Rise in Exports
Imports reached a record $33.5 billion in January, compared to $32.1 billion in December. Exports totaled $17 billion, a scant increase of $12 million from the previous month.
The trade deficit--the gap between what Americans buy from abroad and what is exported--of $16.5 billion for January compared to a revised figure of $15.1 billion for December. The previous record was $15.8 billion, reached last September.
The major imported items last month included petroleum, automobiles, telecommunications equipment, clothing and electronics merchandise.
The biggest single category of imports--$5.2 billion for oil and oil products--should decline in coming months as current cuts in the price of oil at the wellhead affect oil shipped to the United States.
The average cost in the Commerce Department report issued Friday was $27 a barrel, reflecting some imports actually entering this country in November and December but not tallied until January. If the average cost drops to $17 a barrel, reflecting current prices, the country will save $1.8 billion, Baldrige noted.
Too Early to See Change
For American firms, "it's too quick to expect anything on the export side," said Lawrence Fox, international vice president for the National Assn. of Manufacturers.
"It shows what a difficult situation we're still in with respect to trade," he said. "It will take a lot of doing to turn this trade deficit around." American companies "have to get out and sell to people; they have to take advantage of the situation."
Japan, which supplies U.S. markets with large volumes of automobiles and consumer electronics merchandise, is the biggest single contributor to the trade deficit. Imports from Japan in January totaled $7.2 billion, while U.S. exports were worth only $1.8 billion.