Trade deficit plunges as recession deepens

WASHINGTON - The U.S. trade deficit plunged in January to the lowest level in six years. While exports of American products - from farm goods to autos to civilian aircraft - fell sharply, imports fell at an even faster clip as a deepening recession cut demand for goods from abroad.

The Commerce Department said yesterday that the trade imbalance dropped to $36 billion in January, a decline of 9.7 percent from December and the lowest since October 2002. The deficit is the difference between what the United States sells to other countries in goods and services and what it imports.

While the trade gap was better than the $38 billion deficit that economists had expected, they did not see the development as good news.

Imports were down because of the severe recession, already the longest in a quarter-century, and the spreading weakness globally cut even further into U.S. exports, which had until recently been one of the few bright spots.

U.S. manufacturers are now confronted with a darkening picture in which demand for their products is dropping sharply not only at home but also in foreign markets.

For January, exports of goods and services fell 5.7 percent to $124.9 billion. It was the sixth straight month that exports have fallen, pushing them down to the lowest level in more than two years.

Demand fell across a broad spectrum of manufactured goods from heavy machinery to telecom equipment. Commercial aircraft shipments fell by 5.1 percent, and sales of U.S.-made autos and auto parts plunged by 28.3 percent.

Imports of goods fell even more sharply in January, declining by 6.7 percent to $160.9 billion, the lowest since March 2005. The decline was led by a 25.2 percent drop in crude-oil imports.

Economists called the export decline alarming, predicting that it would add to the woes of an economy that was already shrinking at the fastest pace in a quarter-century.

"Many foreign economies have been hit even harder by the recession than the U.S., and we are seeing severe consequences for U.S. exporters," said Nigel Gault, chief U.S. economist for IHS Global Insight.