Trade Deficit Sets a Record : $18-Billion July Figure Points to Worst Year Ever

The nation’s foreign trade deficit surged to a one-month record of $18 billion last month, heading ever faster toward the worst year ever, government figures showed today.

At the current pace, goods entering the country will exceed U.S. exports by $175 billion this year, far surpassing 1985’s record $148.5-billion deficit and adding another crushing blow to already-suffering U.S. manufacturers.

Even U.S. farm produce, long a bright spot in an otherwise bleak trade picture, showed a third straight monthly deficit in July after decades of surpluses.

In further bad news for the generally sluggish economy, the government reported that sales of new single-family homes declined 5.6% in July, the fourth straight decrease for the housing industry.

New houses were sold in July at an annual rate of 658,000, the lowest since last October, and analysts said no big improvement can be expected without further declines in mortgage rates.

Countless Businesses Hurt

The average price hit a record $116,900, up from $109,800 in June.

Meanwhile, the huge trade deficit has hurt countless U.S. businesses that have found Americans switching to foreign goods.

As the deficit has risen in the past few years, much of the blame has been put on the high value of the U.S. dollar relative to other nations’ currencies--a relationship that made foreign goods cheaper for Americans to buy.

However, the value of the dollar has been coming down with no discernible positive effect.

The new report “offers almost no signs of hope on what is the biggest economic problem for the country,” said Allen Sinai, chief economist for Shearson Lehman Bros. in New York.

Size ‘Very Disturbing’

Some economists--and some Reagan Administration officials--have said the declining dollar value will still have an impact, and Sinai agreed. But he also said the size of the overall trade “deterioration is too great to be anything other than very disturbing for the economy.”

Donald Straszheim, chief economist for Merrill Lynch Economics in New York, said the July deficit “may very well be the worst month, but the trade numbers are not going to improve quickly.”

In July, the Commerce Department report said, American businesses and individuals bought more foreign goods in a single month than ever before in history--$35.7 billion, up $3.5 billion from June--even though the nation’s oil-import bill declined.

And exports of U.S.-produced merchandise dipped by $1.4 billion to $17.7 billion after rising in June.

Counting July’s deficit, which surpassed January’s previous one-month record of $16.5 billion, the trade deficit for the first seven months of the year stands at $102 billion.

Agricultural Deficit New

In major categories:

--Trade in agricultural goods showed a deficit of $248 million after deficits of $348.7 million and $71.2 million in May and June, respectively. Officials said that before May there was no record of a farm deficit in the current series of figures that goes back 20 years and no record of a quarterly deficit in figures going back three decades.

--Manufactured goods showed a $16.1-billion deficit in July, far above the $12.7 billion in the previous month.

--With imported-oil prices hitting $12.79 per barrel, the lowest since January, 1976, trade in petroleum and related products showed a $2.8-billion deficit, a bit better than June’s $3.1 billion.

The July deficit reached $5.5 billion with Japan, up from $3.7 billion in June; $4.2 billion with Western Europe, up from $3.8 billion; $2.3 billion with Canada, up from $1.9 billion, and $1.7 billion with Taiwan, up from $1.3 billion.