A record wave of U.S. exports helped narrow the nation's trade deficit to $13.2 billion in November, a 25% improvement over the month before, the government said Friday.
The better-than-expected report touched off strong rallies in financial markets.
The deficit, $4.4 billion smaller than October's record $17.6-billion shortfall, was the best trade performance in seven months, the Commerce Department reported.
Analysts credited recent declines in the value of the U.S. dollar, making American goods cheaper abroad and imports more expensive, for much of the improvement. The dollar is now worth about half of its 1985 value against Japanese and key European currencies.
For the Reagan Administration, long searching for an elusive turnabout in trade accounts, the report was "good news by any test," Commerce Secretary C. William Verity said.
The Dow Jones industrial average leaped more than 50 points by midday on the report. The dollar surged in New York and on European markets, closing at 130 Japanese yen in London--up from 126.65 on Thursday.
By contrast, the report last month of October's $17.6-billion trade gap triggered a 47-point drop in stock prices and sent the dollar plunging to 40-year lows.
Pacing the trade improvement was a 9.4% surge in exports to $23.8 billion, representing the largest overseas sales of U.S. goods in a single month. At the same time, imports fell by 6%, to $37 billion.
Although a modest decline in imports had been expected--they traditionally go down in November--the jump in exports appeared to catch most analysts pleasantly by surprise. It was the first time that exports have increased in November since 1979, Administration officials were quick to note.
In a Boom
"It is no longer accurate to say that we are on the verge of an export boom. We are already in the middle of one," said U.S. Trade Representative Clayton Yeutter.
Presidential spokesman Marlin Fitzwater called the trade improvement "across the board." Asked whether there was still a possibility of a recession this year, he replied: "Not a chance."
Still, despite the dramatic November improvement, the U.S. trade deficit for the first 11 months of 1987 totaled $159 billion, surpassing the record $156.2 billion level for all of 1986. The deficit through November was equivalent to an annualized deficit of $173.4 billion, Commerce Department statisticians said.
The size of the cumulative deficit tempered some of Friday's enthusiasm.
"The November figures are a very significant improvement, but we are going to have a very high deficit for calendar year 1987," said Sen. John C. Danforth (R-Mo.), senior Republican on the Senate Finance subcommittee on international trade. "This means that we can't really take consolation in one month's improvement. We have to have a sustained approach to reducing the trade deficit."
Others cautioned that the monthly trade figures--although closely tracked by Wall Street since the October stock market collapse--are notoriously unreliable.
They are not adjusted for seasonal fluctuations or for inflation, and often there is a long lag between when goods come into ports of entry and when they are reported to the government, critics noted.
Margin of Error
In fact, some of the trade improvement reflected in the November report actually took place in October.
Allen Sinai, chief economist for the Boston Company Economic Advisers Inc., contends that there is about a $2-billion "plus or minus" margin of error in any monthly trade report.
"Despite this element of statistical noise, the figures are unambiguous on the improvement in exports. It comes through loud and clear and with sirens," Sinai said.
For U.S. manufacturers, the report contained nothing but good news.
"It's entirely favorable. And it makes us look awfully smart," said Jerry Jasinowski, chief economist for the National Assn. of Manufacturers, which on Thursday issued a report predicting a $40-billion surge in net exports this year after inflation.
"Exports are booming, thanks to the cheap dollar. And that boom is revitalizing the industrial sector and is the key to U.S. economy growth," said Donald Straszheim, chief economist for Merrill Lynch brokerage.
Among foreign-manufactured imports showing the largest declines were clothing, textiles and communications equipment. At the same time, overseas sales of U.S.-made aircraft, power-generating equipment and chemicals were among the fastest risers.
The trade deficit improved with respect to all the nation's major trading partners--including a decrease in the deficit with Japan to $4.8 billion from $5.9 billion in October. The trade shortfall with Western Europe fell to $2.4 billion from $3 billion in October.
The trade deficit with Canada, this nation's largest single trading partner, decreased to $1.2 billion in November from $1.3 billion.
Overall imports included $2 billion worth of Japanese cars, down from $2.2 billion in October. However, autos from Canada were up, to $1.5 billion from $927.8 million. Also up were cars from other countries, to $1.5 billion, from $1.4 billion in October.
Petroleum imports, following the same downward trend as other imports, fell to $2.7 billion in November from $3.1 billion in October.
In agricultural trade, the only major category where the United States has consistently maintained a trade surplus, the American advantage increased to $954.2 million in November from $698.1 million in October.
The $13.2-billion November deficit was the smallest trade imbalance since the April deficit of $13 billion.