Trade Gap Narrows Again

Washington, DC, January 10, 2007–The trade deficit narrowed again in November, adding support to the argument of some economists that the massive imbalance has finally peaked.

The trade gap narrowed by 1.0% in November to $58.2 billion, the Commerce Department said Wednesday. This is third straight month with a lower deficit, bringing the trade gap to its lowest level since July 2005.

In November, exports rose to a new record level while imports increased at a smaller pace.

The narrowing of the trade gap surprised Wall Street economists, who had expected the November trade deficit to widen to about $59.8 billion, according to a survey conducted by MarketWatch. See Economic Calendar.
The deficit in October was revised down slightly to $58.8 billion from $58.9 billion.

The improvement in the deficit will boost fourth-quarter gross domestic product, economists said. The only debate is the size of the impact.
Despite the improvements over the last three months, the year-to-date deficit is up 7.5% to $701.61 billion, meaning the deficit for 2006 will surpass the record $716.7 billion deficit set last year.

The lower cost of imported oil is part of the story of the improved deficit.
The dollar value of imported petroleum fell by 9.5% to $15.6 billion. This is the lowest import value since February. The quantity of energy-related petroleum imports fell by 4.0% to 299.4 million barrels.

The nation imported an average of 10.0 million barrels of crude oil a day in November. The average price fell by $3.22 to $52.25 per barrel, the lowest price since January.

The U.S. trade deficit with China widened to $22.9 billion in November from $18.5 billion in the same month last year. But the gap was lower than the record $24.4 billion deficit set in October. The trade gap with China rose to $213.5 billion in the first 11 months of the year, up from $185.3 billion in the same period last year.

Imports from China fell 5.2% to $27.8 billion, while exports to China fell 1.7% to $4.9 billion.