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Trade gap down, sentiment up
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January 18, 2002: 10:35 a.m. ET
U.S. trade gap narrows in November; consumer sentiment rises in January.
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NEW YORK (CNN/Money) - The United States trade deficit narrowed in November, the government said Friday, led by a drop in oil imports, while a closely watched gauge of consumer confidence was reportedly much better than expected.
The Commerce Department said the gap between U.S. exports and imports decreased to $27.89 billion from a revised $29.33 billion in October. Economists surveyed by Briefing.com expected a trade gap of $28.6 billion.
Separately, the University of Michigan released its preliminary survey of consumer sentiment for January, and Reuters reported the index rose to 94.2 from 88.8 in December. Economists surveyed by Briefing.com expected the index to rise to 90.
Oil imports contributed the most to the improvement in the trade gap, falling 17.4 percent in November to $6.5 billion, the lowest level since July 1999. Oil import prices were $17.13 a barrel, also the lowest since July 1999.
Total imports fell to $106.09 billion from $106.97 billion in October. Exports rose to $78.2 billion from $77.64 billion in October.
"Although little should be made of one month's data, the smaller pace of import decline in November is consistent with other recent data that suggest that U.S. economic activity may be stabilizing," said Jay Bryson, global economist at Wachovia Securities.
Both imports and exports are well below the record levels set in 2000. Exports peaked at $91.82 billion in August 2000, while imports peaked at $125.67 billion in September. For the first 11 months of 2001, the trade deficit ran at an annual rate of $349 billion.
Stocks were lower after the trade report while the dollar held its small gains versus the yen and the euro.
U.S. manufacturers, who have suffered the most during a prolonged slowdown in the U.S. and global economies, are clamoring for the government to devalue the dollar, whose strength they say hurts demand for U.S. goods in overseas markets and contributes to the trade gap.
Imports and exports are also components of gross domestic product (GDP), the broadest measure of economic strength. Plunging exports helped U.S. GDP shrink in the third quarter of 2001 and may have done so again in the fourth.
"It looks like these numbers are consistent with a small decline in fourth quarter GDP," Gary Thayer, chief economist with A.G. Edwards & Sons, told Reuters.
Shrinking GDP in two straight quarters is the common definition of a recession.
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The National Bureau of Economic Research, which defines recessions differently, said a recession began in March 2001 and was worsened after the Sept. 11 terrorist attacks.
The biggest damper on the economy, according to the NBER, has been unemployment, which has risen to 5.8 percent and will likely keep rising even as the economy recovers.
In order to keep consumers spending despite mounting job cuts, the Federal Reserve cut its target for short-term interest rates 11 times in 2001. Many economists expect it to cut rates again at its next policy meeting, scheduled for Jan. 29-30.
The Fed's efforts have helped restore consumer confidence after the blow it suffered on Sept. 11; the University of Michigan's index has reportedly bounced back from a bottom of 81.8 reached immediately after the attacks.
The current conditions index, which measures Americans' attitudes about their present financial situation, slipped to 98.1 from 99.0 in December, Reuters said. But the expectations index, measuring hopes for the coming year, surged to 91.7 from 82.3 in December. 
- from staff and wire reports
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