The U.S. trade deficit narrowed in December due in part to a sharp drop in oil prices

The Commerce Department reported today that the U.S. deficit in international trade of goods and services shrank 4.9% to US$56.40 billion in December from a downwardly revised gap of US$59.33 billion in November. Economists had forecast a deficit of US$57.0 billion.

Commerce said the U.S. 2004 deficit jumped 24.4% to a record US$617.73 billion.

Overall imports rose just 0.9% in December to US$156.57 billion, as U.S. demand for foreign-made autos, foods, and big-ticket capital goods offset a decline in capital goods.

Exports rose 3.2% to a US$100.17 billion in December, amid record U.S. foreign shipments of industrial materials, autos and consumer goods.

Deficits with major trading partners were mostly lower in December, but almost every one recorded a record deficit for the year 2004, Commerce said. The shortfall with China narrowed by US$2.37 billion to US$14.26 billion, bringing the annual deficit to US$161.98 billion.

The deficit with Canada fell to US$4.85 billion, and the shortfall with Mexico dropped to US$3.40 billion. The 2004 deficit with Canada and Mexico, partners in the North American Free Trade Agreement, totaled US$110.83 billion.

Separately, the U.S. Labor Department said initial jobless claims decreased by 13,000 to 303,000, after seasonal adjustments, in the week that ended Feb. 5 from an unrevised 316,000. The four-week average fell by 16,000 to 315,500. Economists say averages below 350,000 are evidence of net job creation.