Trade deficit drops to lowest level since ’03

WASHINGTON -- —  The trade deficit plunged to the lowest level in five years in November as a deepening recession slashed demand for oil by a record amount. Imports from China also fell by the largest amount on record.

The Commerce Department reported Tuesday that the trade deficit narrowed to $40.4 billion in November, a 28.7% decline from October’s deficit of $56.7 billion. The bigger-than-expected decrease left the deficit at its lowest level since November 2003.

The trade deficit through November is running at an annual rate of $688.2 billion, down from the 2007 imbalance of $700.3 billion. The 2007 deficit represented the first decline after five years of record highs.

Economists expect that the trade deficit will fall even more sharply this year as the recession further cuts demand for imported products.

For November, exports of goods and services dropped by 5.9% to $142.8 billion, the smallest level in 14 months. This reflected big declines in sales of American farm products, autos and heavy machinery.

Imports fell by an even larger 12% to $183.2 billion, the lowest level in 2 1/2 years. The huge decline was led by the largest-ever drop in crude oil, reflecting a record fall in the average price of a barrel of crude. Total petroleum imports were down 36.5% to $23.6 billion. Analysts predicted further declines since oil is now trading more than $100 below its all-time high of $147 a barrel set in July.

The politically sensitive deficit with China shrank by 17.5% to $23.1 billion in November, the smallest imbalance since June. The big drop reflected a record decline in imports from China as shipments of consumer goods, including cellphones, toys and clothing, all fell. U.S. exports to China also were down sharply, reflecting smaller shipments of metals, computers and aircraft.