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Economy in Brief

U.S. Trade Deficit Narrowed Sharply
by Tom Moeller February 14, 2008

The U.S. foreign trade deficit in December narrowed sharply to $58.8B from an unrevised $63.1B during November. The figure compared to Consensus expectations for a deficit of $61.4B and it pulled the annual deficit for 2007 to $771.6B, its lowest since 2004.

For December U.S. exports jumped 1.5%, the largest monthly increase since July. Strong economies abroad and the lower value of the dollar helped exports during all of last year to rise 12.2% after a 12.7% gain in 2006 and a 10.9% rise in 2005.

Exports of goods surged 1.9% in December (14.5% y/y) and for the full year rose 12.2%. Growth in exports of foods, feeds & beverages slipped 1.7% in December but for the year this was the strongest export category with a 27.7% rise. Exports of industrial supplies & materials also were strong last year and rose 14.3%. During December exports of capital goods surged 5.2% to finish a year of 7.8% growth after a 14.2% jump in 2006. Exports of civilian aircraft rose 20.8% during all of last year while exports of computers jumped 18.3%.Nonauto consumer goods exports also were strong in December. They rose 4.6% and were firm all year with a 12.6% increase. That was similar to the gains during the prior three years.

U.S. exports of services slipped 0.3% in December but finished a year of 11.8% growth. That annual gain was paced by 14.1% growth in travel exports and a 12.1% rise in passenger fares.

Overall imports fell 1.1% in December and the annual gain of 5.9% was the weakest since 2002. Higher oil prices did raise petroleum imports by 4.2% in December and by 9.5% for the year, however, that was the weakest annual rise since 2002. Petroleum imports in constant dollars fell as the per barrel price of crude petroleum rose 11.1% for the year. That followed price gains of 23.2% in 2006 and of 36.3% in 2005. Imports of nonauto consumer goods rose 7.3% last year, the weakest gain since 2001 and capital goods imports increased 6.3% for the year, the weakest gain since 2003.

The U.S. trade deficit in goods with China during 2007 deepened to $25.6B from $23.3B. Imports rose 11.7% and exports rose 18.2%, the weakest rise since 2002.

The Economy and Financial Markets is today's testimony by Fed Chairman Ben S. Bernanke and it is available here.

Today's speech by Treasury Secretary Henry M. Paulson, Jr., Economy and Financial Markets, can be found here.

Foreign Trade  December November Y/Y 2007 2006 2005
U.S. Trade Deficit $58.8B $63.1B $60.3B
$711.6 $758.5 $714.4B
Exports - Goods & Services 1.5% 0.5% 13.6% 12.2% 12.7% 10.9%
Imports - Goods & Services -1.1% 2.9% 8.4% 5.9% 10.4% 12.9%
  Petroleum 4.2% 16.3% 52.4% 9.5% 20.1% 39.6%
  Nonpetroleum Goods -2.8% 0.9% 0.5% 4.6% 9.1% 10.3%
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