Dec. Trade Deficit Falls to $12.2 Billion : $171.2-Billion Gap in ’87 Record High; Imports Hold Level

The U.S. trade deficit narrowed to $12.2 billion in December, the smallest gap since January, 1987, as exports hit a record, the Commerce Department said today.

For the year, the trade deficit widened to $171.2 billion, the largest ever. But financial markets were expected to pay more attention to the December numbers, which came two months after the Oct. 19 stock market crash.

December’s merchandise trade deficit of $12.2 billion was an improvement from the $13.2-billion gap posted in November.

December’s deficit, the smallest since an $11.9-billion shortfall in January, 1987, was paced by a record $24.8 billion in exports, a 4.2% improvement over November. November’s gain had also resulted from surging exports.

Imports, meanwhile, were at $37 billion in December, the same level as in the previous month.

Still, for the year, the difference between what the United States imported and what it exported soared 9.6% from the previous record deficit of $156.2 billion in 1986.

The Reagan Administration was quick to hail the new numbers. Trade Representative Clayton K. Yeutter said the drop in the deficit “is good news, particularly since this is the second straight monthly decline. . . . We hope this is a sign that there are better days ahead on the trade front.”

‘Middle of Major Change’

Jay Goldinger, economist for Cantor, Fitzgerald, a Los Angeles bond brokerage, said the trade figures demonstrate that “we are in the middle of a major change in course” on the balance of trade.

“But it’s a big ship. And you don’t turn it on a dime. But at least we know we’re headed home,” Goldinger said.

Exports have been climbing in recent months under pressure from a weaker dollar--which makes U.S. goods more competitive abroad while driving up the price of imports.

Government and private economists have suggested that an export boom could be the major factor in finally bringing down the trade deficit, which has been increasing steadily since the late 1970s.

The United States continued to run its largest deficit with Japan--$59.8 billion in 1987, up from $58.6 billion in 1986.

In a separate economic report released today, the Labor Department said wholesale prices rose a brisk 0.4% in January as higher food costs more than offset declines in energy prices.

Offsets December Decline

The rise in the Labor Department’s Producer Price Index negated a 0.4% decline in December and was the steepest monthly increase since an identical 0.4% jump in September.

January’s rise, if it persisted for 12 months, would amount to an annual inflation rate of 4.6%, compared with the 2.2% increase for all of 1987. Economists, however, still expect that wholesale prices will moderate through the balance of 1988.

Wholesale food prices increased 1.7% in January, rebounding from a 1.4% decline in December.

Analysts said an insect infestation in California and Arizona pushed up vegetable prices, while cold weather influenced a rise in chicken and pork prices.

Natural gas prices edged up 0.8% after a 3% increase in December. But steep declines were recorded for other forms of energy, which overall fell 4.5%.