Feb. 11 (Bloomberg) -- The U.S. trade deficit narrowed less than anticipated in December to the smallest in almost six years as the recession pushed oil prices and consumer spending lower, reducing imports.
The gap between imports and exports shrank 4 percent to $39.9 billion, the lowest since February 2003, from a revised $41.6 billion deficit in November that was wider than previously estimated, the Commerce Department said today in Washington. Imports fell to the lowest since 2005.
Mounting job losses, a lack of credit and a global downturn signal that imports and exports, both of which fell in December for the fifth straight month, will slide further. Some U.S. firms are lobbying for a “Buy American” provision in President Barack Obama’s stimulus plan, while nations such as France and Russia are taking steps to protect local jobs and production.
“The boost from trade has vanished,” Jonathan Basile, an economist at Credit Suisse Holdings in New York, said before the report. “U.S. demand is falling even faster than demand from our trading partners. There’s weakness across-the-board in imports, and the global recession will be a damper on exports.”
The trade gap was estimated to narrow to $35.7 billion, from an initially reported $40.4 billion in November, according to the median forecast in a Bloomberg News survey of 70 economists. Deficit projections ranged from $31 billion to $45 billion.
Deficit Narrowed
For all of 2008, the U.S. trade deficit narrowed to $677.1 billion from $700.3 billion in the previous year.
Treasuries were little changed, with longer-term securities ending a two-day rally, before a record $21 billion auction of 10-year government notes. The 10-year note yield rose 2 basis points, or 0.02 percentage point, to 2.82 percent at 8:36 a.m. in New York, according to BGCantor Market Data.
Imports in December dropped 5.5 percent to $173.7 billion, the lowest since September 2005, from $183.9 billion the prior month as U.S. consumers bought fewer foreign-made cars and trucks and oil prices fell. Purchases of clothing, furniture and household appliances from outside the U.S. also declined, further reflecting shrinking demand for foreign-made goods.
The average price of imported oil fell to $49.93 a barrel, the lowest since December 2005, from $66.72 in November, the report said.
Exports in December fell 6 percent to $133.8 billion. Sales abroad of U.S.-made automobiles, parts and engines fell to the lowest level since November 2004.
After eliminating the influence of prices, which are the numbers used to calculate gross domestic product, the trade deficit widened to $43.3 billion from $40.1 billion.
China Trade
The trade gap with China narrowed to $19.9 billion, while the trade deficit with Canada shrank to $2.8 billion.
Imports from the European Union increased, causing the trade gap with the bloc to widen to $7 billion.
U.S. gross domestic product is forecast to contract again this quarter after shrinking at a 3.8 percent annual pace from October to December, the most since 1982, as consumer spending, about 70 percent of the economy, plunged.
Trade, which has added to the U.S. economy since the first three months of 2007, will be less of a help in coming quarters, economists predict.
PPG Industries Inc., the world’s second-biggest paint maker, said last month that it may cut as many as 4,500 jobs because of weak global demand from automakers and homebuilders.
“The regions outside of North America, which had been really helping PPG in the first three quarters of last year, have sort of caught the disease that started here in the U.S. with the credit crisis,” Chief Executive Officer Charles E. Bunch said Jan. 27 in an interview.
Seeking Mandate
Steel companies including U.S. Steel Corp. and Nucor Corp. are pushing for a mandate that projects included in Obama’s stimulus plan use American-made iron, steel and other manufactured goods to build roads, bridges and tunnels.
Opponents of the provision, such as Caterpillar Inc., Microsoft Corp. and the U.S. Chamber of Commerce, have said it might spur protectionist measures around the world.
Congressional leaders are crafting an approach that would give preference to U.S. products only as long as such a move doesn’t violate trade rules.
The White House has demanded that the provisions satisfy U.S. obligations under the World Trade Organization.
Russia raised import duties on cars and trucks this year to protect its slumping producers. French automakers PSA Peugeot Citroen and Renault SA will get government loans after promising to keep jobs and production in the country.
European Union finance ministers decried protectionism when they met this week in Brussels to discuss how to help banks take toxic assets off their books, rescue carmakers and bring the euro-region economy out of a recession.
The global economy will expand 0.5 percent in 2009, the weakest pace since World War II, according to a forecast from the International Monetary Fund.
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