October Trade Gap Falls to $12.1 Billion; Best in 14 Months

The nation’s trade deficit narrowed to $12.1 billion in October, the third consecutive monthly decline, the Commerce Department reported today. It was the best trade balance performance in 14 months.

The improvement, down from a $12.6-billion shortfall in September, appeared to bear out contentions by Reagan Administration officials that the nation’s huge trade deficit may finally be starting to ebb.

An increase in exports, rather than a decline in imports, was entirely responsible for the reduced trade deficit.

Imports in October totaled $31.4 billion, up from $30.1 billion the month before. Exports totaled $19.3 billion, up from $17.5 billion in September.

‘Deficit Has Stabilized’

Commerce Secretary Malcolm Baldrige said the increase in exports, amounting to 10.3%, shows that “the trade deficit has stabilized and will show an improving trend. This trend should contribute to a pickup in economic growth next year.”

Despite the improvements, Sen. Lloyd Bentsen (D-Tex.), the incoming chairman of the Senate Finance Committee, said he will press ahead with trade legislation in the new Congress even if President Reagan threatens a veto.

In the past, Bentsen has sponsored legislation that would sharply restrict imports--a proposal the Administration has opposed as protectionist.

Despite three months of a declining deficit, the trade imbalance for the first 10 months of 1986 was running at an annual rate of $167.9 billion--far outpacing the record $148.5-billion deficit for 1985.

Declining Dollar Cited

Analysts suggested that the deficit is easing under the impact of a declining dollar that is making imports more expensive at home and U.S. goods more competitive abroad.

Since September, 1985, the dollar has declined 33% against the Japanese yen and 24% against the German mark. However, import prices have not risen nearly as fast as the dollar has fallen as foreign manufacturers accept lower profit margins to keep their share of lucrative U.S. markets.

October’s trade deficit was the lowest since a $12.1-billion shortfall in August, 1985.

Some economists argued against reading too much into the monthly deficit figures, maintaining that they are often unreliable because of a lag time of up to several months in reporting some imports.

But three months of back-to-back declines at least pointed toward a clear trend of improvement.

Farm Trade Gains

Exports of manufactured goods rose to $13.4 billion in October, up from $12.3 billion the previous month. Imports of manufactured goods also rose in October, to $24.5 billion from $22.4 billion in September.

Farm trade, which had posted a deficit for three months earlier this year, also continued to improve. The United States ran an agricultural surplus of $675.2 million in October, up from $138 million in September.

Oil and petroleum product imports declined to $2.7 billion in October, down from $3.1 billion in the month before.

The largest single deficit in October, as usual, was with Japan--$5 billion, up from $4.1 billion in September.