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January 7, 2015 11:25 AM, EST

Trade Gap Shrinks More Than Forecast as US Oil Imports Dry Up

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The trade deficit narrowed in November as U.S. petroleum imports sank to the lowest level in more than five years.

The gap shrank 7.7% to $39 billion, the smallest since December 2013, from October’s $42.2 billion, Commerce Department figures showed Jan. 5 in Washington.

The median forecast in a Bloomberg News survey of 69 economists projected $42 billion. The smallest quantity of crude oil imports in more than two decades and the lowest prices in four years combined to limit the value of foreign-fuel purchases.

“The main story is the fall in oil prices bringing down total imports,” Jay Bryson, global economist at Wells Fargo Securities, said before the report. “We’ll continue to see a narrowing in the trade deficit at least in value terms.”

A combination of rising supply as domestic production picks up and slower growth overseas that’s reducing demand is leading to a rout in oil prices that has continued into 2015. Outside of fuel, Americans bought record amounts of consumer goods that shows the world’s largest economy is strengthening.

“Domestic demand here is pretty strong, and we think that will continue to be pretty strong,” Bryson said. “That sucks in imports.”

Bloomberg survey estimates for the trade gap ranged from deficits of $39 billion to $43.9 billion. The Commerce Department initially reported a $43.4 billion shortfall for October.

Imports dropped 2.2%, the most since June 2013, to $235.4 billion from $240.6 billion in the prior month.

The U.S. imported $23.1 billion worth of petroleum in November, the least since August 2009. The 189 million barrels of foreign crude oil purchased during the month were the fewest since February 1994, and the $82.95 average price per barrel was the lowest since December 2010.

Excluding petroleum, the trade gap would have been little changed in November at $27.6 billion compared with $27 billion the prior month.

Slower foreign demand is also holding back orders for U.S. products. Exports declined 1% to $196.4 billion from $198.3 billion in October.

After eliminating the influence of prices, which generates the numbers used to calculate gross domestic product, the trade deficit narrowed to $47.8 billion compared with $50.1 billion in October. The average so far in the fourth quarter is little changed from the previous three months, indicating trade won’t have much impact on GDP.

A narrowing of the trade deficit in the three months ended in September added 0.8 percentage point to growth, the category’s biggest contribution in three quarters, according to Commerce Department figures.

GDP advanced at a 5% annual rate in the third quarter, the strongest gain in 11 years and up from a previously estimated 3.9% pace.

Similar contributions to GDP will be difficult to match in subsequent quarters as faster growth in the U.S. and slower demand among trading partners boosts imports and slows exports.

At the same time, companies including Dearborn, Michigan-based Ford Motor Co. are betting a slowing in exports amid waning global demand won’t spoil a U.S. trend of 3 % growth or better this year.

“While the strong dollar does have the potential to put some damper on that, I don’t think it’s going to be a significant factor in terms of offsetting the other positive forces that are supporting overall economic growth this year,” Chief Economist Emily Kolinski Morris said on a Jan. 5 conference call, citing cheaper fuel and job gains among the factors boosting demand.

Lower prices at the pump have been cushioning consumers’ balance sheets since September. The average cost of a gallon of regular gasoline was $2.19 as of Jan. 5, marking 103 consecutive decreases and the cheapest rate since May 2009, according to data from motoring group AAA.

Monthly employment gains are on pace to show their best performance in 2014 in 15 years, further propelling U.S. growth. An average 240,910 jobs were added each month last year through November. December figures from the Labor Department are scheduled for release Jan. 9.