A mixed picture

By Catherine Clifford
Last Updated: January 13, 2009: 10:54 AM ET
NEW YORK (CNNMoney.com) -- The nation's trade deficit narrowed sharply in November, to the lowest level in 5 years, reflecting the sharp drop in the price of imported oil, according to a government report released Tuesday.

The U.S. Department of Commerce reported that imports exceeded exports by $40.4 billion, down substantially from a revised $56.7 billion trade gap in October.

Economists had expected a $51 billion gap, according to a consensus estimate compiled by Briefing.com.

The last time that the trade deficit was this narrow was November 2003, when the gap was $40 billion, according to Department of Commerce records.

Imports fell $25 billion, or 12%, to $183.2 billion in November, while exports fell $8.7 billion, or 5.7%, to $142.8 billion

By MARK GONGLOFF
JANUARY 13, 2009, 6:04 A.M. ET
Wall Street Journal

After giving generously to the U.S. economy last year, trade may soon start taking away.

The Census Bureau reports November's international trade data Tuesday morning. Economists, on average, think the U.S. trade deficit sank to $51 billion from $57.2 billion in October, as imported oil prices tumbled and demand for other imports evaporated amid a deep recession.

A slimmer trade deficit can boost gross domestic product. For much of 2008, for example, demand for U.S. exports whittled down the trade gap and helped keep GDP positive, offsetting the drag of a collapsing housing market.

But the global economy has fallen off a cliff, taking demand for American exports with it. That means trade could start to work against GDP soon, particularly when economists adjust trade numbers for inflation, taking away some of the paper benefit of lower oil prices.

Here is an example of the havoc that could wreak: Citigroup economist Steven Wieting estimates the deficit in goods, adjusted for inflation, widened at such a pace in October that, if sustained across the quarter, it would have subtracted 2.2 percentage points from GDP -- a bigger hit even than the drag from slower consumer spending, a component that makes up some 70% of GDP.

(Add-on from Brad Sester:

There isn’t anything good in this graph other than the fall in the trade deficit. Falls in exports and imports signal contracting global activity. And I am not even sure that the improvement in the trade balance will continue, as I suspect the combination of a stronger dollar and a broadening global slowdown will eventually have a major impact on exports — and the US fiscal stimulus will bleed into imports. But the US led the world down and for now, US imports are falling faster than US exports … )