WASHINGTON — A flood of manufactured imports pushed the trade deficit to a record $17.6 billion in October, a giant 25.3% above the September imbalance, the government said today, prompting a shocked Congress and financial markets to demand corrective action.
The unexpectedly huge gap between imports and exports sent the value of the dollar sharply lower and persuaded the Federal Reserve Board to prop up the U.S. currency with purchases of dollars.
In afternoon trading, the dollar dipped to a postwar low against the Japanese yen, down a fraction below the psychologically significant 130 barrier compared with a close of 132.25 Wednesday night.
The October merchandise trade deficit, reflecting a surge in auto imports from Japan and other countries, compared with a $14.1-billion shortfall in September. It easily topped the record of $16.5 billion set in July of this year.
Cars, Petroleum Blamed
Twenty-eight percent of the October deficit increase came in auto imports, as 1988 model cars flooded into the United States. Ten percent reflected additional imports of petroleum products, as U.S. buyers stocked up on oil in advance of the winter heating season. Farm imports also rose.
The deficit "should sound alarms among decision-makers and dissuade them from thinking this problem is going to solve itself," said Owen Bieber, president of the United Auto Workers.
"How do I react to the trade figures? It's shocking, incredible," said Jay Goldinger, a financial analyst with Cantor, Fitzgerald & Co., Beverly Hills.
"It's an indication of how deep-seated the trade problem is," added Lawrence Chimerine of the WEFA Group economic forecasting firm in Bala Cynwyd, Pa.
'Preference for Imports'
Despite the sharp drop in the value of the dollar, which makes domestic goods more attractive to foreign buyers and foreign goods more expensive in the United States, "The preference for imports is so high that people are still buying them," Chimerine said.
"The nation's trade policy is an absolute and total failure," said Sen. Donald W. Riegle (D-Mich.). "We've got to get tough trade laws passed here in the Congress, and the President must sign those laws immediately."
House Speaker Jim Wright of Texas said that when Congress returns in January "our top priority will be to complete" House-Senate negotiations on the trade bill.
For the first 10 months of 1987, the U.S. trade deficit was $145.8 billion contrasted with $138.2 billion in the same period last year.