Page last updated at 16:01 GMT, Tuesday, 13 January 2009

US trade deficit at five-year low

Petrol pump
Fuel imports dropped sharply

The US trade deficit dropped to its lowest level in more than five years in November as the economic slowdown led to lower demand for imports.

The trade deficit shrank 28.7% from October to $40.4bn (27.7bn), the Commerce Department said.

Total imports fell 12%, led by a 36.5% drop in oil imports after the price of crude dropped sharply.

There are expectations that the US trade deficit will continue to narrow as 2009 progresses.

The latest deficit figure was lower than expected and came after October's downwardly revised $56.7bn trade deficit.

Kathy Lien, director of currency research at GFT in New York said: "Although the narrower trade deficit is normally something to cheer about, the details of the report indicate that the only reasons why trade improved was because of the fall in oil prices and slower domestic demand".

Ms Lien added: "Unfortunately the strength of the dollar did not drive stronger US demand for foreign goods but it did cut exports by 5.8%".

Trade flows 'crushed'

The politically sensitive trade deficit with China dropped to $23.1bn from $28bn for the month, the figures showed, following a sharp drop in imports into the US from the world's most populous nation.

China's economy is slowing as the global economic downturn has led to falling demand for its goods in the US and Europe.

"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.

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