Trade Deficit Dips to $6.49 Billion in Feb., Biggest Fall in 6 Yrs.

The U.S. trade deficit plunged dramatically to $6.49 billion in February, the smallest imbalance in more than six years, the government reported today.

The Commerce Department said that the 30% improvement from a $9.32-billion January deficit came primarily from a big drop in imported oil.

Total imports fell by 7.6% to $38.12 billion while U.S. exports, which had hit a record level in January, edged down a slight 1% to $31.63 billion. The trade deficit is the difference between what America imports and what it sells abroad.

The changes gave the United States its lowest monthly trade imbalance since December, 1983, when it was $5.68 billion.

The February deficit was significantly better than had been expected, but economists said the good news is likely to be short-lived.

That would be a blow to the Bush Administration, which is counting on further gains in U.S. exports to lift the fortunes of American manufacturers and provide a boost to a sluggish U.S. economy.

But at the White House, Michael Boskin, chairman of the White House Council of Economic Advisers, hailed the decrease in the trade deficit as “very good news indeed.” At the same time, Boskin said, “we can’t yet tell the extent to which it is a temporary or permanent phenomenon.”

Many private economists said that the trade deficit may actually begin rising again this year as the United States grows more dependent on foreign oil and demand for exports weakens because of the strength of the U.S. dollar. A stronger dollar makes American goods less competitive on foreign markets.

Analysts were particularly disturbed by the fact that there were widespread declines in a variety of U.S. export categories. The 1% overall drop would have been even larger except for a huge jump in shipments of aircraft.

However, analysts said that was a temporary surge attributed to a backlog in shipments at Boeing, which was idled late last year by a strike.

In February, oil imports, which had surged by 44% in January, fell 20% to $4.71 billion as both the volume of shipments and the price per barrel dropped.

The big swing in both months was weather-related. A severe cold snap in December depleted fuel supplies and forced record imports in January. However, unusually warm weather in January reduced oil demand in February.

Analysts said with domestic oil production now at 25-year lows, they expect foreign oil shipments to resume rising in coming months with the price expected to climb as well.

In addition to the drop in oil shipments, imports of consumer appliances and other durable goods fell by 7.5% while imports of clothing and other consumer nondurable goods dropped by 10%.

However, imports of foreign cars were up by 25% to $2.56 billion in February.

That was a primary reason that the deficit with Japan rose during the month to $3.12 billion, accounting for close to half of the overall deficit.