WASHINGTON - America's trade deficit narrowed dramatically as U.S. exports climbed to an all-time high. But a surge of auto imports pushed the deficit with Japan to its highest level in 14 months, and the deficit with China hit a record high.
The Commerce Department said Thursday that the overall deficit shrank to $7.99 billion in October, down 30.2 percent from September's imbalance of $11.44 billion, which had been the second-worst showing on record.
The improvement reflected a big jump in sales of commercial aircraft, which helped offset rising oil imports.
Despite the overall improvement, the deficit with Japan shot upward by 30.9 percent in October to $4.96 billion as Japanese autos and auto parts flooded into the country.
The Clinton administration, which had been taking credit for a shrinking deficit with Japan, blamed the October increase on seasonal factors.
Commerce Secretary Mickey Kantor said that the introduction of new automotive models makes the deficit with Japan look worse every year in September and October. He noted that for the first 10 months of the year, the deficit with Japan stands at $39.1 billion, 24 percent below the same period a year ago, an improvement he said reflected improving U.S. competitiveness.
But private economists expressed concerns that the widening deficit with Japan could be further evidence that U.S. manufacturers are beginning to suffer from the strength of the U.S. dollar, especially against the Japanese yen.
Marino Marcich, director of international investment for the National Association of Manufacturers, said he was concerned that Japan was about to be joined by Germany and other European countries in efforts to drive their currencies down in relation to the dollar as a way to spur overseas sales.
"Large trade deficits will persist until the economies of our trading partners begin to match U.S. performance and the dollar is allowed to settle at a rate determined by market forces," Marcich said.
Financial markets seemed encouraged by the overall decline in the trade deficit along with other reports indicating the economy is slowing enough to keep inflation under control. In early afternoon, the Dow Jones industrial average was up more than 75 points.
In other reports, the Labor Department said Thursday that new claims for unemployment benefits climbed by 1,000 last week after a revised increase of 20,000 the week before. The new total of 351,000 claims last week was the highest in five months.
"Job growth has clearly slowed, which should ease inflation concerns," said Bruce Steinberg, an economist at Merrill Lynch in New York.
In a third report, the Philadelphia Federal Reserve reported that its general index of business conditions in the Northeast fell sharply in December, a further sign, economists said, of a slowing economy.
The October trade report showed that U.S. exports rose by 4.2 percent to a record $71.74 billion while imports edged down a slight 0.7 percent to $79.72 billion.
The U.S. deficit with China widened for a seventh consecutive month, climbing 3.5 percent to $4.9 billion. Imports from China, where America gets a large portion of its toys and shoes, hit a record.
So far this year, America's trade deficit is running at an annual rate of $113.4 billion, 7.9 percent above the 1995 deficit of $105.1 billion.
Much of the increase in the deficit this year has been from a surge in America's foreign oil bill, reflecting rising prices.
For October, oil imports rose 5.1 percent to $6.27 billion, the highest level since November 1990 during the Persian Gulf crisis. The average price per barrel of crude oil climbed to $21.38, the highest level since January 1991.
So far this year, America's non-oil deficit is 20.1 percent lower than a year ago, but America's oil bill is 2.4 percent higher.
Shipments of commercial airliners more than doubled in October, rising to $1.75 billion. The increase of $990 million represented almost half the total gain in exports for the month. Exports of telecommunications equipment and computer chips also showed big gains during the month.
The overall deficit of $7.99 billion was the smallest monthly imbalance since a $7.87 billion deficit in March.