A record decline in the price of crude oil helped to push the U.S. trade deficit down to the lowest level in nearly a year even though the deficit with China shot up to an all-time high.
The Commerce Department reported Thursday that the trade deficit fell 4.4 percent to $56.5 billion in September, the smallest imbalance since October 2007.
The better-than-expected improvement reflected a 15.7 percent fall in petroleum imports as the average price for imported crude oil dropped by a record $12.41 per barrel and the volume of shipments fell to the lowest level in more than five years.
The big drop in oil imports helped to slash overall imports by 5.6 percent to $211.9 billion. Demand for imported goods fell by a record amount, reflecting the sharp slowdown in the U.S. economy, which many analysts fear is headed for a prolonged recession.
Bucking the overall downward trend, imports from China shot up in September, led by huge gains in shipments of televisions, toys and games as retailers stocked up for the holidays. That big jump combined with a sharp drop in U.S. exports to China resulted in a record overall trade gap between the two nations of $27.8 billion.
U.S. exports, which had been one of the few bright spots for the economy, also faltered in September, suffering a sizable one-month decline of 6 percent to $155.4 billion.
President George W. Bush was serving as host for a first-ever meeting of the leaders of the Group of 20 largest industrial countries and leading developing nations in Washington over the weekend.
The group was gathering to develop a common strategy for fighting the worst financial crisis to hit the global economy since the 1930s. Bush was expected to urge the other leaders to avoid resorting to protectionist trade policies in the face of the global downturn.
Through the first nine months of this year, the trade deficit is running at an annual rate of $712.7 billion, up from last year's imbalance of $700.3 billion but still below the all-time high of $753.3 billion set in 2006. Economists believe the trade deficit will keep falling in coming months as a sharp slowdown in the United States depresses demand for imports.
For September, imports of foreign-made autos and auto parts fell to $18.6 billion, the lowest level since February 2004, underscoring that foreign car companies as well as U.S. automakers are being hurt by the economic slowdown.
The bill for imported oil dropped to $37 billion in September, down from $43.9 billion in August and an all-time high of $51 billion in July. The average price for a barrel of imported crude fell by a record of $12.41 cents in September to $107.58. With oil now trading below $60 per barrel, analysts are looking for further improvement in the oil bill in coming months.
In addition to the record deficit with China, the U.S. trade gap with Canada rose by 3.2 percent to $7.8 billion while the deficit with the European Union jumped 22.8 percent to $8.3 billion.