WASHINGTON — The nation's merchandise trade deficit, in its best showing since May, narrowed by $1.6 billion in September to $14.1 billion, the Commerce Department reported Thursday.
The report helped send the stock market soaring, with the Dow Jones industrial average up 60.61 points for the seventh-largest point gain on record.
A month ago, by contrast, when the Commerce Department reported a $15.7-billion trade gap for August, down only slightly from July's record deficit, the market responded with a four-day, 750-point crash.
"This is one report with no holes in it," said Allen Sinai, chief economist for Shearson Lehman Bros. in New York.
A leading cause of the narrowing trade gap was an increase in U.S. manufacturing exports to all major trading regions except Canada.
Fewer Japanese Cars
Also, imports fell across a wide front. Americans bought fewer Japanese cars, whose prices have risen as the international value of the dollar has slid. And they bought less oil from the Middle East after a summer of inventory stockpiling that had helped propel the overall trade deficit to record monthly levels.
David Wyss of Data Resources Inc., a Lexington, Mass., forecasting firm, focused on the $800-million reduction in oil imports.
"The summer widening in the trade deficit was entirely accounted for by the oil imports, and this confirms my feeling that the summer widening was a fluke," Wyss said. "That means the improvement in trade is real."
Jay Goldinger, an investment counselor with the Los Angeles brokerage house of Cantor, Fitzgerald, also found the decline in imports significant. "This shows that consumption of imports began declining even before the (stock market) crash," he said. "That means we can expect a sharply reduced trade deficit in the next few months, and we'll probably see imports decrease faster than we see exports grow."
Goldinger warned, however, that this probable slowdown in consumption could also bring a recession next year unless the Japanese and Europeans expand their own economies enough to consume more U.S. products.
"We'll get what we want--a lower trade deficit," Goldinger said. "But what we get with it isn't necessarily what we want."
Gains Called Overstated
Just as the summer's monthly trade deficit reports exaggerated the size of the gap, Wyss said, this one overstated the apparent improvements. The increase in manufacturing exports, he said, merely reflected a trend that occurs every September.
And Michael Penzer, an economist with the Bank of America in San Francisco, noted that the price of oil fell in September to $18.53 a barrel from $19.31, exaggerating the apparent fall-off of oil imports.
Muting the trade report's impact on the financial markets is the Federal Reserve Board's continuing effort since the October stock crash to flood the banking system with cash.
An improvement in the trade balance would ordinarily boost the dollar's value in international currency markets, taking pressure off the Fed to raise U.S. interest rates to prop up the dollar.
But, in current circumstances, the Fed has already abandoned a policy of tight money and high interest rates in order to stave off a stock market-induced recession. Now the markets seem more concerned with the value of the dollar and with the negotiations between Congress and the Administration, which hit a snag Thursday, to reduce the federal budget deficit.
Worried About Recession
"This is not as big a deal as it would have been a month ago," Wyss said. "Up until Oct. 19 (the day of the crash), everyone assumed the Fed would have to tighten to defend the dollar if there was a bad trade number. Now, everyone knows the Fed is more worried about recession. So, with this good report, there is no reason to believe this automatically means lower interest rates. They already are lower."
Members of Congress who have pressed for legislation to defend U.S. industries from what they consider unfair foreign competition declared themselves to be unimpressed by September's figures.
"The trade numbers . . . came in lower than some of our gurus had predicted, and we're all grateful for that," said Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.). But he warned that the decline in oil imports was unlikely to be repeated in future months.
The Commerce Department report showed that exports, including agricultural commodities, rose from $20.2 billion in August to $21 billion in September. The overall $800-million gain was slightly smaller than a $1.1-billion gain in manufacturing exports because all other exports declined slightly.
At the same time, total imports declined to $35.1 billion from $35.9 billion. Petroleum imports, accounting for the entire decline, fell to $3.9 billion from $4.7 billion.
Widespread Trade Gains
Except for Canada, whose currency has been declining in step with the U.S. dollar, the report showed a narrower trade deficit with every major trading region: not only Western Europe and Japan but also the Asian exporting countries of Taiwan, Korea and Hong Kong, the oil producers and the big Latin debtor nations of Mexico and Brazil.
Auto imports from Canada rose to $693 million from $376 million in August, but imports from Japan fell to $1.6 billion, down from $2 billion in August. And, from the rest of the world, auto imports were $886 million, compared to $1.15 billion in August.
Even with September's improvements, the nation's trade deficit in 1987 is running ahead of last year's record pace. For the first nine months of 1987, the merchandise trade deficit totaled $128.2 billion, compared with $123.5 billion for the same period in 1986.