Trade gap narrows for 2nd straight year

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NEW YORK (CNNMoney.com) -- The gap between the nation's imports and exports narrowed in December to a six-year low, according to a government report Wednesday. The gap for the year turned sharply lower and marked the second straight year of shrinking annual trade deficits.

In 2008, the trade gap narrowed to 3.3% to $677.1 billion, down from the revised 2007 trade deficit of $700.3 billion.

The Department of Commerce reported the December gap fell 4% or $1.7 billion to $39.9 billion. That's down from the upwardly revised $41.6 billion deficit in November. The last time the trade gap was this low was February 2003 at $39.7 billion.

Economists surveyed by Briefing.com had forecast the gap would narrow to $35.5 billion.

The trade deficit did not fall as far as many had hoped, according to Ian Shepherdson, economist at High Frequency Economics in New York.

"Despite the impact of the drop in oil prices and a one-time jump in aircraft exports, which we expected, the headline deficit did not fall as far as we had hoped thanks to a massive plunge in core exports," Shepherdson wrote to investors.

Imports fell to $173.7 billion in December, while exports fell to $133.8 billion.

Prior to the past two years of narrowing annual trade gaps, the trade deficit had been on a 16-year upward trend, starting in 1991, when the annual trade deficit was only $31.2 billion. During that time, the trade deficit declined only in 2001, a recession year, when the downturn in the economy trimmed the appetite for exports.