Trade gap narrows to smallest in a decade

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WASHINGTON (Reuters) -- The U.S. trade gap narrowed unexpectedly to $26 billion in May to the lowest reading since November 1999, as exports rose and imports shrank, government data on Friday showed.

The Commerce Department said exports increased 1.6% to $123.3 billion, while imports declined by 0.6% to $149.3 billion.

Analysts polled by Reuters had expected the trade deficit to widen to $30.2 billion in May. The trade gap in April was revised to $28.8 billion from a previously reported $29.2 billion deficit.

May's import level was the lowest since July 2004 and the 10th straight monthly decline, providing further evidence that the recession-mired United States has diminished as a source of demand for the rest of the world.

The auto sector has been hard hit in the economic slowdown and May imports of automotive vehicles and parts slipped to $10.2 billion, the lowest level since March 1996, while auto exports were the lowest since July 1998.

The monthly deficit on goods trade with China grew to $17.5 billion from $16.8 billion in April and was the largest with any single country.

But the U.S. trade deficit with other big trading partners declined, falling to $2.8 billion with the European Union in May, for the lowest reading since March 1999, and retreating to $1.9 billion with Japan, which was the lowest since February 1984.

Imported oil cost $51.21 a barrel in May, up from $46.60 in April. The value of crude oil imports in May declined only slightly to $13.4 billion, despite a sharper decline in the quantity of oil actually imported, to 262 million barrels from 293 million in April, the Commerce Department said.