The U.S. trade deficit narrowed in November likely as efforts by businesses to reduce an inventory overhang pushed imports of goods to their lowest level in nearly five years, outpacing a drop in exports.
The Commerce Department said on Wednesday the trade gap fell 5.0 percent to $42.4 billion. October's trade deficit was revised up to $44.6 billion from the previously reported $43.9 billion.
Despite the shrinking trade deficit, declining exports are the latest indication that economic growth braked sharply in the fourth quarter. While inventories likely accounted for much of the drop in imports, the weakness could also be pointing to a slowdown in domestic demand, which was flagged by weak December automobile sales.
Economists polled by Reuters had forecast the trade gap widening to $44.0 billion in November. When adjusted for inflation, the deficit fell to $59.60 billion from $61.03 billion in October.
Trade, which subtracted 0.26 percentage point from gross domestic product in the third quarter, is likely to have remained a drag on growth in the fourth quarter.
A strong dollar and the inventory bloat, which has left businesses with little appetite to order more merchandise, have combined with spending cuts in the energy sector to take some steam out of the economy in recent months.
Economists this week slashed their fourth-quarter GDP growth estimates by as much as one percentage point to as low as a 0.5 percent annual pace, which also accounted for unseasonably warm weather that has impacted on sales of winter apparel and other merchandise.
The economy grew at a 2 percent annual rate in the third quarter.
Businesses accumulated a record pile of inventory in the first half of 2015, which was unmatched by demand, leaving warehouses bulging with unsold goods.
Imports of goods dropped 2.0 percent to $183.5 billion in November, the lowest level since February 2011. Imports of industrial supplies and materials were the weakest since May 2009. There were also declines in imports of capital and consumer goods. Auto imports, however, rose.
Lower oil prices as well as increased domestic energy production also helped to curb the import bill. The price of petroleum averaged $39.24 per barrel in November. That was the lowest level since February 2009 and down from $40.12 in October and $82.92 in November 2014.
The dollar gained almost 10 percent against the currencies of the United States' main trading partners last year, eroding the appeal of U.S.-made goods overseas. Lackluster global demand also has put a damper on exports.
Goods exports slipped 1.1 percent to $122.2 billion in November, the lowest since June 2011.
Exports of industrial supplies and materials hit their lowest level in five years, while petroleum exports were the weakest since December 2010. Exports of non-petroleum products dropped to their lowest level since June 2011.
The decline in exports to the United States' main trading partners was nearly broad-based in November. But the politically sensitive U.S.-China trade deficit fell 5.2 percent to $31.3 billion in November.