U.S. Trade Deficit Declines for Second Month in a Row : Drop Linked to Falling Dollar Value

America’s trade deficit declined for the second consecutive month in September, to $12.56 billion, suggesting that the falling value of the dollar is stemming the flow of foreign goods into the United States, the government said today.

Commerce Secretary Malcolm Baldrige said the report is evidence “that we have turned the corner on the trade deficit.”

The Commerce Department said imports fell 2.7% to $30.1 billion last month, while exports dipped 0.5% to $17.5 billion.

After a comparatively low $13.32-billion deficit in August, the September trade shortfall was the smallest since April’s $12.07 billion, the Commerce Department reported.

Imports--which fell nearly $5 billion in August--dropped another $847 million to $30.08 billion in September.

Economists said the decline was apparently tied to the weaker dollar.

Some Analysts Cautious

Private analysts agreed that the improvement--due largely to lower imports of manufactured goods, including automobiles from Japan--is welcome news. But some cautioned that it is not necessarily a sign of the long-awaited turnaround in trade accounts.

Higher prices for imports are discouraging Americans from buying foreign goods, but U.S. exports to other countries fell fractionally to $17.52 billion last month.

Once the pricing effects are really felt, exports should increase.

“There will be temporary setbacks, but we have turned the corner on the trade deficit,” Baldrige said. “Foreign trade has been a drag on the economy but from here on it will begin to contribute to economic growth.”

Despite the improvement, the mammoth trade deficit is headed toward a record $170.5 billion at year’s end.

The 1985 trade shortfall was $148.48 billion.

Predicts Gain in Exports

Baldrige admitted the trade picture could not improve dramatically without a rise in exports but he insisted, “We will see an improvement in exports.”

But Lawrence Chimerine, president of the Chase Econometrics forecasting service, said it is premature to say the trade deficit is turning around.

“We’re probably at the point now where the trade deficit is at its worst. We will need several more months to make sure a turnaround is taking place. Exports are still very sluggish,” Chimerine said.

“These are basically good numbers because they show some broad-based slowdown in manufacturing imports,” said Jerry Jasinowski, chief economist for the National Assn. of Manufacturers.

But, he said “I underline the modest aspect of this. This may be the beginning of more positive trade numbers, but we still have a long way to go.”

Rise in Petroleum Imports

The deficit in manufactured goods, from airplanes to consumer goods, fell nearly $1.5 billion to $10.5 billion, the lowest since April. Manufactured imports were valued at $22.75 billion, the lowest since February.

The improvement in manufacturing trade was partly offset by a rise in petroleum imports to $3.05 billion, due in part to a rise in the cost of a barrel of crude oil from $11.95 to $12.67.

The deficit in petroleum trade was $2.8 billion in September, up from $2.25 in August.

Trade with industrial countries showed the most dramatic improvement.

The U.S.-Canada shortfall declined almost $700 million to $1.49 billion last month, and the U.S.-Japan deficit dropped about $580 million to $4.12 billion.

The trade balance with Western Europe also improved, with the deficit falling about $680 million to $1.78 billion in September.