Trade Deficit Falls to Five Year Low

Washington, DC, Jan. 13, 2009--The trade deficit fell to the lowest level in five years in November as demand for oil dropped by a record amount. Imports from China also fell by the largest amount on record.

The Commerce Department reported Tuesday that the trade deficit narrowed to $40.4 billion in November, a 28.7 percent decline from October's deficit of $56.7 billion. The bigger-than-expected decrease left the deficit at its lowest level since November 2003.

The trade deficit through November is running at an annual rate of $688.2 billion, down from the 2007 imbalance of $700.3 billion. The 2007 deficit had represented the first decline after five years of record highs.

Economists expect the trade deficit will fall even more sharply this year as the recession further cuts demand for imported products.

Imports fell by an even larger 12 percent to $183.2 billion, the lowest level in 2 1/2 years. The huge decline was led by the largest-ever drop in crude oil, reflecting a record fall in the average price of a barrel of crude. Total petroleum imports were down 36.5 percent to $23.6 billion.

The deficit with China shrank by 17.5 percent to $23.1 billion in November, the smallest imbalance since June. The big drop reflected a record decline in imports from China as shipments of consumers goods, from cell phones to toys and clothing, all fell. U.S. exports to China also were down sharply, reflecting smaller shipments of metals, computers and aircraft.

For November, the deficit with Canada, America's biggest trading partner, shrank to $3.3 billion, a drop of 43 percent and the smallest imbalance in six years.

The deficit with the European Union fell by 41.7 percent to $5.6 billion, while the imbalance with Mexico dropped by 26.8 percent to $3.5 billion.