Trade gap narrows for 2007

The U.S. trade deficit shrank more than forecast in December and showed the first annual drop since 2001 as the faltering economy eroded demand for imported autos and consumer goods.

The gap narrowed 6.9% from November to $58.8 billion, the Commerce Department said Thursday. Imports fell 1.1%, and exports rose 1.5%.

Though the slowdown in consumer spending is pushing the economy closer to a recession, the decrease in imports will probably lead the government to increase its estimate of fourth-quarter gross domestic product.

A weaker dollar and continued expansions in Europe and Asia may forestall a deeper slump at American manufacturers.

“The trade balance is going to continue to be a support for the economy,” said David Resler, chief economist at Nomura Securities International Inc. in New York. “The drop in imports is probably consistent with the view the domestic economy is turning quite soft.”

Economists had forecast that the deficit would contract to $61.5 billion, according to the median of projections in a Bloomberg News survey.

A separate report from the Labor Department showed that claims for unemployment benefits fell for a second week, while staying in a range consistent with a slowing job market.

Initial claims fell by 9,000 to 348,000 in the week ended Feb. 9, from 357,000 a week earlier. The four-week moving average of claims, a less volatile measure, rose to the highest level since October 2005.

For all of last year, the trade deficit shrank 6.2% to $711.6 billion, the biggest decrease since 1991. Last year was the first time the trade gap narrowed since 2001.

Exports rose 1.5% to $144.3 billion in December, setting a record for a 10th straight month and reflecting more demand for U.S.-made capital equipment and industrial supplies. For the year, exports rose 12% to a record $1.622 trillion.

Imports in December declined 1.1% to $203.1 billion, reflecting lower demand for foreign-made autos, consumer goods, food and capital equipment.