Wednesday January 14, 02:19 AM
US deficit narrows sharply, Chinese imports in record plunge
By P. Parameswaran
WASHINGTON, (AFP) - A sharp decline in the US November trade deficit reflected a record drop in imports from China and a sharp contraction in global commerce, according to government data.
The goods and service trade deficit narrowed by a hefty 28.7 percent to 40.4 billion dollars from October, a five-year low the Commerce Department said in a monthly report Tuesday.
The November figure was a much larger improvement than the 51 billion dollars forecast by analysts, following 56.7 billion dollars chalked up the prior month.
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, analysts said.
"The key message from this report is bad news -- it shows both export and import volumes contracting sharply as the global economy tumbles into recession," said IHS Global Insight chief US economist Nigel Gault.
The narrowing November trade gap resulted from exports of 142.8 billion dollars and imports of 183.2 billion dollars, with contraction seen in both exports and imports, the Commerce Department said.
The trade deficit was the lowest since November 2003, it said.
A big part of the drop came from the massive drop in crude oil prices. Petroleum imports fell 36.5 percent to 23.4 billion dollars.
The politically sensitive trade deficit with China dropped 17.5 percent to 23.1 billion dollars, the department said.
It pointed out that imports from the world's most populous nation plunged a record 16.9 percent to 28.3 billion dollars.
Exports to China fell 14 percent to 5.2 billion dollars.
The burgeoning US deficit with China has been a thorn in relations, with American lawmakers particularly often blaming it on the weak Chinese yuan currency. Some of them had sought sanctions against Beijing.
US president-elect Barack Obama had accused China of manipulating its currency before he won the November elections and called for Beijing to change its foreign exchange policies to rely less on exports and more on domestic demand for growth.
Despite the narrowing deficit with China in November, experts say it was still exceptionally high.
"The deficit did narrow (with China) as we bought a lot less, but it is still incredibly high as they cut back their minimal purchases from us," said Joel Naroff, of Naroff Economic Advisors.
The January to November 2008 deficit with China rose by 3.8 percent from a year earlier to 246.5 billion dollars, the Commerce Department said.
"The huge trade deficit is nearly entirely by trade with China, imports and automobiles and parts," said Peter Morici of the University of Maryland, blaming what he called an overvalued dollar against the yuan and Chinese protectionism, among other reasons.
Overall US imports dropped by 12 percent in November, with purchases of automotive vehicles, parts and engines the lowest since August 2003, official data showed.
US import volumes are expected to fall faster than those of exports in 2009, with some experts predicting the monthly deficit to average around half the November figure.
The United States, the world's biggest economy and a key engine of global growth, has been in recession for more than a year with companies shedding jobs in record numbers amid plunging earnings and poor sales.
The trade data for November confirmed "the end of the manufactured goods export boom that had been the brightest spot in the US economy," said US National Association of Manufacturers vice president Frank Vargo.
The rapidly falling demand for imports overseas had almost across-the-board effect on US exports, he said.
Some experts believe the narrowing trade deficit could help cushion the falling US economic growth rate, of up to six percent in the last quarter of 2008.
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