The U.S. trade deficit narrowed in November to US$38.01 billion from US$41.77 billion in October, the Commerce Department reported today. Economists had expected a rise to US$42 billion. The November figure was the lowest deficit since $35.20 billion recorded in October 2002.

The unexpected sharp drop surprised economists. BMO says the December figure was well below the consensus expectations of a US $42.0 billion deficit.

“Exports continued to chug higher, rising 2.9%, and have now posted three straight months of solid growth, aided by the ongoing global economic rebound and the weaker U.S. dollar,” it says.

CIBC World Markets cautions that November’s deficit was small only by the standards of the past year and market expectations. But, it allows that it carried with it positive signs for fourth quarter growth, “as it was generated by a hefty and broadly-based gain for exports.”

“The decline in the U.S. dollar seems to be giving a boost to U.S. exports, such that the trade balance may be neutral to a slight positive for Q4 growth,” Nesbitt concludes.

On that count, CIBC is raising its’ Q4 GDP forecast by two ticks to 4.3%, “with the sharper pace for export gains offsetting a softer assumed pace for inventory restocking.”

In a separate report, the U.S. Labor Department said that producer prices rose by 0.3% in December, reversing a decline of 0.3% in November. Excluding volatile food and energy prices, the “core” figure fell by 0.1%, matching a decline of 0.1% in November.

Economists say the rise is not enough to spark inflation fears, or higher rates anytime soon.

“December’s PPI showed a continued firming in producer prices, particularly further up the supply chain, as prices for inputs increasingly reflect US dollar weakness,” CIBC World Markets says. “The report should not be viewed, however, as the harbinger of the return of inflation to the US economy, since a 1.0% yearly core rate is still quite low by historical standards, and core PPI inflation typically exhibits wider swings than core CPI inflation.”

Nesbitt agrees, noting, “U.S. PPI underscores lack of inflation pressure and keeps Fed tightening entirely off the radar screen.”

The next piece of economic data for the day comes out at 14:00 ET, when the U.S. Federal Reserve releases the Beige Book, its anecdotal survey of regional U.S. economies.