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Weak imports drive U.S. trade deficit to four-year lows

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[January 08, 2014]  By Lucia Mutikani

WASHINGTON (Reuters) — The U.S. trade deficit fell to its lowest level in four years in November as exports hit a record high and weak oil prices held down the import bill, the latest evidence of strengthening economic fundamentals.

Tuesday's report left economists anticipating a far stronger growth pace for the fourth-quarter than previously expected, with some predicting trade could contribute as much as a full percentage point to output during the period.

"The report should dispel worries that fourth quarter growth will be really weak," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. "It may not be robust, but should set us up for even better growth this year."

The trade gap fell 12.9 percent to $34.3 billion, the Commerce Department said. That was the smallest deficit since October 2009 and was below economists' expectations for a $40 billion shortfall.

The deficit stood at $39.3 billion in October.

When adjusted for inflation, the gap narrowed to $44.6 billion in November from $47.0 billion the prior month. This measure goes into the calculation of gross domestic product.

With more of what Americans consume being produced at home and exports rising, economists pushed up their fourth-quarter growth estimates by as much as 1 percentage point to as high as a 3.3 percent annual rate.

The economy grew at a 4.1 percent rate in the third quarter, but there had been fears that GDP growth could slow to a rate of not more than 2.5 percent as businesses worked through an inventory glut and a 16-day government shutdown in October reduced federal workers' output.

The trade data added to reports on employment, manufacturing and consumer spending that have suggested the economy is positioned for faster growth this year.

The outlook has been strengthened by a pick-up in domestic demand and diminishing uncertainty over U.S. fiscal policy.

U.S. stocks rose on the data, after three days of losses. The dollar gained against a basket of currencies, while U.S. Treasury debt prices were little changed.


In November, exports rose 0.9 percent to $194.9 billion. That was the highest on record and marked a second straight month of gains. There were increases in exports of industrial supplies, capital goods and automobiles.

Petroleum exports hit an all-time high.

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Exports to China also reached a record high in November, narrowing the politically sensitive U.S. trade deficit with the world's second-largest economy. Exports to China were up 8.7 percent in the first 11 months of the year.

There were also increases in exports to Germany and Japan.

Overall imports fell 1.4 percent to $229.1 billion in November. Part of the decline reflected a lower petroleum import bill, which was the smallest since November 2010.

Crude prices fell over the month and there was also a decline in the volume of oil imported as the United States ramps up domestic production. The petroleum deficit was the smallest since May 2009.

"The shale revolution and increased energy efficiency have pushed the U.S. a long ways towards energy independence," said Ted Wieseman, an economist at Morgan Stanley in New York.

Imports of industrial supplies and materials were the lowest in three years. But auto and capital goods imports hit a record high.

Strengthening consumer spending, however, should draw in more imports, widening the deficit in the months ahead.

(Reporting by Lucia Mutikani; editing by Paul Simao)

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