US trade gap shrinks to nine-year low

The US trade deficit narrowed sharply in May to its lowest level in nearly a decade, led by a plunge in imported oil and a rebound in exports, government data showed Friday.

The deficit fell nearly 10 percent in May to a seasonally adjusted $26bn, the lowest level since November 1999, the Commerce Department said. Most analysts expected the gap would widen to $30bn amid the global recession that has battered international trade. The May deficit was 57.1 percent lower than a year ago, while trade volume grew only 0.4 percent. The Commerce Department lowered the April deficit to $28.8bn from $29.2bn.

The reduction in the trade gap resulted from a slight decline in imports and a stronger increase in exports as the weak dollar made US goods and services more affordable.

With the world’s biggest economy reeling from a prolonged recession, imports fell for the 10th consecutive month, by 0.6 percent, to $149.3bn, their lowest level since July 2004.

Exports, which had fallen for the two preceding months, increased 1.6 percent, their strongest gain since July 2008, to $123.3bn. Exports of goods rose $2bn to $82.1bn, as increases in exports of industrial supplies and materials; foods, feeds, and beverages; consumer goods; and capital goods more than offset a decline in automotive vehicles, parts, and engines.

The goods deficit fell 6.5 percent to $37.3bn. The services surplus rose for the third month running, by 2.1 percent to $11.4bn. A steep 11 percent drop in oil imports accounted for half the decline in the May trade gap. Excluding oil, the trade gap closed 4.7 percent.

The deficit with Canada, the largest US trading partner, tumbled nearly in half in May from April, to $628m, a trough last seen in March 1994. The politically sensitive gap with China, the country’s second-largest trading partner and responsible for more than half of the US deficit, widened 4.4 percent to $17.484bn from $16.754bn in April.

Critics accuse the Asian powerhouse of keeping its currency artificially low to gain a trade advantage. The US trade gap with the 16-nation eurozone halved in May from April, to $2.096bn. With Japan, the deficit narrowed to $1.914bn from $3.218bn