Nov trade gap shrinks on record import plunge
WASHINGTON (Reuters) - The U.S. trade deficit shrank nearly 29 percent in November, the largest decline in 12 years, as weak consumer demand and plummeting oil prices caused imports to sink by a record amount.
The $40.4 billion trade gap was the lowest since November 2003, the Commerce Department said in its monthly report on Tuesday, and another sign of how the global financial crisis has damaged world commerce.
Both U.S. imports and exports declined for the fourth consecutive month after hitting record peaks in July.
"It really says the wolf is at the door. Americans aren't buying anything," said Ed Gresser, director of the Progressive Policy Institute's trade office. "The problem isn't competition, but lack of demand for anybody's product."
The much smaller-than-expected deficit could trim slightly estimates of how much the U.S. economy contracted in the fourth quarter of 2008, analysts said.
But with the report showing consumer demand falling sharply at home and abroad, it is hard to call it good news, said Nigel Gault, chief U.S. economist with Global Insight in Lexington, Massachusetts.
"It is slim comfort that the U.S. cut its demand for imports more rapidly than the rest of the world cut its demand for U.S. exports. That might cushion the U.S. downturn a little, but it is not a route to recovery," Gault said.
U.S. stocks fell for the fifth straight day on Tuesday as investors fretted over what many expect will be a gloomy earnings season. Treasury bond prices eased on revived hope of government action to shore up the value of risky assets like mortgages and corporate bonds.
The dollar soared to a one-month high against the euro on the trade data, but was unchanged against the yen in late trading.
U.S. imports in November fell a record 12 percent to $183.2 billion as the global financial crisis scared businesses and consumers into cutting their spending.
U.S. exports fell 5.8 percent in November to $142.8 billion. Total U.S. goods exports were the lowest since June 2007, while auto and auto part exports were the lowest since October 2006.
Imports of both capital and consumers goods were the lowest since mid-2006, while auto and auto part imports fell to levels not seen since August 2003.
The average price for imported oil plunged a record $25.30 per barrel in November as recession fears deepened. Along with the drop in prices to $66.72 a barrel, the average daily volume of U.S. oil imports fell 1.7 million barrels.
Oil prices have continued to fall since November, suggesting even smaller trade gaps in the months ahead.
"The beauty part is that the trade deficit will shrink as much in the next couple of months because oil prices fell at a pretty constant rate," said Christopher Low, chief economist at FTN Financial in New York.
Imports from China fell by a record $5.7 billion, or nearly 17 percent, in November. Even with that sharp decline, the U.S. deficit in goods trade with China totaled $23.1 billion, more than half the overall monthly trade deficit.
The U.S. trade gap with China totaled $246.5 billion year-to-date through the end of November, putting it on the cusp of surpassing the record $256.3 billion set in 2007.
The overall trade deficit totaled $630.9 billion through November, down from $642.7 billion in the same period last year, reflecting strong export growth earlier in 2008.
(Editing by Dan Grebler)
