May trade deficit falls to lowest in almost 10 years

WASHINGTON -- The U.S. trade deficit fell to the lowest level in more than nine years in May as exports posted a small gain and the weak economy pushed imports down for a 10th straight month.

The Commerce Department said Friday the deficit narrowed to $26 billion, a drop of 9.8% from April and the lowest level since November 1999. Economists expected the deficit to widen to $30.2 billion in May.

So far this year, the deficit is running at an annual rate of $350 billion, about half of the $695.9 billion deficit for all of 2008. Economists believe that trend will continue as weakness in the U.S. depresses demand for imported goods.

The big improvement reflects the prolonged U.S. recession, which has sharply reduced American demand for imported goods. U.S. exports are also down from last year's peaks, hurting American manufacturers, but those declines have been smaller than the plunge in imports.

The politically sensitive deficit with China rose 4.4% to $17.5 billion in May, but is running 12.6% below the record pace of last year. America's deficit with Canada, its largest trading partner, dropped to $628 million, the smallest monthly imbalance in 15 years. The deficit with Japan shrank to $1.9 billion, the lowest deficit with that country in more than two decades.

Exports of goods and services rose 1.6% to $123.3 billion in May, reflecting increased sales of soybeans, corn and other farm products, along with higher exports of industrial machinery, generators and computers. But even with the May increase, U.S. exports are 25% below the record-high set in July 2008.

Imports edged down 0.6% to $123.3 billion, the 10th consecutive monthly decline. Imports are 34.9% below the all-time high set last July.

The May decline reflected a 3.4% drop in petroleum imports to $17.4 billion. The decrease reflected lower volumes as the average price of an imported barrel of crude oil rose to $51.21, from 446.60 in April.

Oil prices pushed above $70 per barrel last week only to retreat Friday to below $60 on renewed worries about global economic weakness.