Shrinking trade gap lowest in 6 years
The U.S. trade deficit fell to the lowest level in nearly six years in December as the recession depressed demand for imports. In 2008, the trade deficit fell for a second straight year and economists expect an even bigger decline this year.
The Commerce Department said Wednesday that December’s deficit fell 4% to $39.9 billion from $41.6 billion in November. That was higher than the $36 billion deficit economists expected.
For the year, the deficit shrank 3.3% to $677.1 billion. It was the second straight annual decline after five years of record deficits.
The 2008 imbalance was the lowest annual total since 2004, and many economists believe the deficit for 2009 will be half the size of last year’s gap. However, the improvement is due to a painful recession that is cutting demand for imports of oil, autos and other foreign-made products.
Nigel Gault, an economist at IHS Global Insight, expects the trade deficit will shrink to $308 billion this year, based on U.S. demand for imports falling faster than global demand for exports.
The expectation that the trade deficit will plunge 55% this year also is based on a forecast that oil prices, which averaged about $100 per barrel in 2008, will drop to just $37 per barrel this year, Gault said. But he expects the trade deficit will rise in 2010, reflecting a resumption of growth in the United States and higher oil prices.
The politically sensitive trade gap with China continued rising in 2008, hitting an all-time high of $266.3 billion.