Tuesday January 13, 02:59 PM
US trade deficit drops by hefty 28.7%
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WASHINGTON (AFP) - The US trade deficit fell a hefty 28.7 percent in November to the lowest level in five years in a reflection of the sharp contraction in global commerce, government data showed Tuesday.
The 40.4 billion dollar deficit in international trade in goods and services in the penultimate month of 2008 was much lower than the 51 billion dollars forecast by analysts, and followed a revised 56.7 billion dollars chalked up in October.
The November deficit resulted from exports of 142.8 billion dollars and imports of 183.2 billion dollars, the Commerce Department said.
The politically sensitive trade deficit with China dropped by 17.5 percent to 23.1 billion dollars from 28.0 billion dollars in October and, the department said, the drop in imports from the world's most populous nation was a record.
Exports to China fell 800 million dollars to 5.2 billion dollars, while imports decreased 5.7 billion dollars to 28.3 billion dollars.
While the deficit decline is a positive for statistical measures of the US economy, it underscored the global slump stemming from financial turmoil triggered by the US home mortgage crisis, experts said.
"As far as we can tell, trade flows have been crushed by the credit crunch, which has reduced demand for traded goods and services and made it more difficult for exporters and importers to obtain trade finance," said Ian Shepherdson, chief US economist with High Frequency Economics.
He said the sharp narrowing of the US trade deficit stemmed from a much bigger plunge in oil imports than expected.
"The good news is that the drop in the trade deficit will provide support to the fourth quarter and, with carry-through, the first quarter US gross domestic product (GDP) numbers," said Patrick O'Hare of Briefing.com.
The impact on GDP will be a "direct result of the contraction of the real (price-adjusted) trade deficit" to 39.5 billion dollars in November from 45.6 billion dollars in October, he said.
"This 6.1 billion dollars improvement translates into a substantial annualized rate that has a much greater impact on GDP calculations than is generally recognized by market participants," O'Hare said.
The bad news, however, was that the data clearly reflect a "sharp contraction in overall global trade," he said.
"Trade is contracting, and the net impact on the US might be temporarily positive, but it will be correspondingly negative outside of the US, and the long-term implications for economic growth are clearly negative."
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