US trade deficit falls for first time in six years

WASHINGTON: The US trade deficit narrowed in 2007 for the first time in six years, as a slowing economy reduced demand for imports and despite a politically charged record gap with China, government data showed on Thursday.

The US international trade gap fell to $711.6 billion from $758.5 billion, as strong exports bouyed by a weak dollar offset record-high oil prices, the Commerce Department reported.

Still, the improved trade picture was marred by a growing deficit with China, a politically sensitive issue that has sparked outrage over China's alleged currency manipulation and the loss of US manufacturing jobs.

The 2007 decline of 6.2 percent in the trade gap came after five consecutive years of record peaks and amid slowing economic growth that reduced demand for imports. It marked the biggest decrease since 1991, when the US economy was also slowing down.

"US domestic demand is weakening further but activity was boosted by global demand. How long that will last for is the question," said Andrew Busch, an analyst at BMO Capital Markets.

The services sector, the dominant player in the world's largest economy, saw exports rise by $49.9 billion in 2007 to $472.5 billion.

In December, the trade deficit fell more sharply than expected, to $58.8 billion from a virtually unrevised $63.1 billion in November. Analysts' consensus forecast was $61.5 billion.

The overall monthly decline was due to a 1.5 percent rise in exports, to $144.3 billion, and a 1.1 percent fall in imports, to $203.1 billion.

Most of the $2.4-billion fallback came from a $2.1-billion, drop in auto imports. However, demand for consumer goods and business capital equipment was also down.

The average price of an imported barrel of oil was up 3.9 percent, helping produce record total petroleum imports of 36 billion dollars. The rising US oil bill, however, was not enough to overcome the fall of imports in non-petroleum goods.

For exports, most of the $1.9-billion increase in December came from civilian aircraft deliveries, which rose $1.4 billion. Boeing's sales are frequently the single biggest monthly figure in US exports.

Agricultural and auto exports fell but overseas demand rose for US consumer and capital goods other than airplanes.

The December numbers reveal that record petroleum imports accounted for more than half the total US trade deficit, but the trade gap in non-petroleum products fell to $34.8 billion, its lowest level since November 2003.

The US had record exports to China of $6.9 billion in December, slashing the trade deficit by 21.5 percent to $18.8 billion. For the full year, the goods deficit with China spiked to $256.3 billion from $232.6 billion in 2006. Exports to China increased $10.1 billion to $65.2 billion, while imports increased $33.7 billion to $321.5 billion.

The spiraling deficit with China drew immediate protest from the American Manufacturing Trade Action Coalition (AMTAC).

"Swift action from Congress is needed to stanch the hemorrhaging of US manufacturing jobs lost to predatory imports from China," said AMTAC executive director Auggie Tantillo.

"Congress must recognize that rising home foreclosures and the subprime crisis are connected, in part, to the loss of US manufacturing jobs," he said.

Tantillo called for passage of proposed legislation to punish China for allegedly keeping its yuan currency undervalued to maintain an illegal trade advantage.