U.S. trade deficit hits 6-year low-WEB ONLY

The U.S. trade deficit fell to the lowest level in nearly six years in December as the recession depressed demand for imports. The trade deficit in 2008 fell for a second straight year, and economists expect an even bigger decline this year.

The Commerce Department said today that the deficit in December fell 4 percent, to $39.9 billion, from $41.6 billion in November. It was slightly higher than the $36 billion deficit economists expected.

For the year, the deficit shrank by 3.3 percent, to $677.1 billion. It was the second straight annual decline after five straight 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.

The politically sensitive deficit with China continued rising in 2008, hitting an all-time high of $266.3 billion, the highest imbalance ever recorded with any country.

The deficit with China has set records throughout the decade, triggering a political backlash with growing calls for trade sanctions against Beijing for what critics contend are unfair trade practices that have cost American manufacturing jobs.

Still, Chinese exports are not immune to the effects of recession. China’s exports plunged in January amid collapsing global demand, according to customs data released yesterday. Exports fell 17.5 percent last month compared with the year-ago period, and a sharper drop than December’s 2.8 percent.

The back-to-back annual declines in the U.S. trade deficit were the first time that has occurred since it fell for four straight years in the late 1980s and early 1990s.
The $39.9 billion December imbalance was the smallest deficit since the gap totaled $39.7 billion in February 2003.

Exports of U.S. goods and services in December dropped 6 percent, to $133.8 billion, the fifth straight monthly decline. Sales of farm products, domestic cars, medical equipment and computers all fell.

Imports dropped 5.5 percent in December, to $173.7 billion. Imports of petroleum products fell 6.7 percent to $22.3 billion, the lowest level in 22 months, as the average price of an imported barrel of crude oil dropped to $49.93, the lowest point since December 2005.

Imports of autos and auto parts dropped to $14.9 billion, the lowest level since May 1999.