Trade Deficit Falls but Experts See Stall Ahead

The U.S. trade deficit narrowed to $10.35 billion in October, the government reported today, a small improvement that left unimpressed economists glumly predicting that the big gains in the country’s trade battle are at an end.

The Commerce Department said that the merchandise trade gap between what the United States imports and what it sells overseas fell by 3.1% from a September deficit of $10.67 billion for the smallest imbalance in three months.

The decline represented the second consecutive monthly improvement. But many analysts were dubious, saying that after monthly fluctuations, the deficit has been essentially flat for several months.

“I think the improvement in the trade deficit has stalled out,” said Allen Sinai, chief economist of Boston Co. “We still have a very heavy flow of imported goods, especially on the manufacturing side.”

The Reagan Administration was more optimistic. Commerce Secretary C. William Verity cited the progress made so far, noting that exports have climbed by 28% over the last 10 months as the cheaper dollar made U.S. goods more attractive abroad.

“While the trend continues to be favorable, our trade deficit is still very large. Eliminating it, which is our goal, poses a major challenge,” Verity said.

The October trade improvement came from a 1.7% drop in imports, which declined to $38.02 billion on a seasonally adjusted basis.

This decline offset a smaller 1.1% drop in U.S. exports, which edged down to $27.67 billion.

Even with the small setback in exports, U.S. overseas sales remained near record high levels.

This remarkable surge in export sales has been responsible for almost half of America’s overall economic growth this year as American manufacturers have hired workers and stepped up output to meet demand.

Through October, the overall merchandise trade deficit has been running at an annual rate of $136.1 billion, 20% below the all-time high imbalance of $170.3 billion recorded last year.

Some economists contend that the dollar must fall further to make U.S. goods even more competitive and dampen Americans’ appetite for imports. Other analysts are urging the Bush Administration to waste no time in launching an aggressive effort to open more foreign markets to American products.

The October report is likely to provide ammunition to these critics because of a 34.1% jump in the trade deficit with Japan.