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The US trade deficit dropped to 58.5 billion dollars in April as Americans slashed spending on imports, including oil, pointing to fresh signs of recovery in the world's biggest economy. However, the gap with China rose by 2.2 billion dollars, adding further pressure on the US administration over policies toward Beijing.
The trade deficit with the rest of the world fell 6.2 percent in April from a revised 62.4 billion dollars in March, the Commerce Department said. It was the steepest decline since October, confounding analysts' consensus forecast of an increase to 63.5 billion dollars.
Imports dropped a sharp 1.9 percent to 188 billion dollars, mainly in the consumer goods and automotive categories. Exports rose a modest 0.2 percent rise to a record 129.5 billion dollars.
Rising oil prices, which hit 57.28 dollars per barrel in April, their highest level since September, were partly offset by a decline in the quantity of imports. The oil deficit slipped to 22.3 billion dollars from 22.4 billion in March.
The drop in the deficit "is welcome news," said John Shin of Lehman Brothers. "We've been expecting an improvement around oil, but in fact you saw a reduction in imports of consumer goods, capital goods, automobiles."
On the services side, the 0.2-billion-dollar uptick was mainly in travel and other transportation categories. Analyst Robert Brusca of FAO Economics said the latest export data could give the US economy "a nice upward kick" in the second quarter and further dash expectations of a Federal Reserve interest rate cut this year, pressuring the stock and bond markets.
"These figures should - unfortunately - help to extend the bond selloff as all these factors work in the direction of making GDP (gross domestic product) look stronger," Brusca said.
The data also will help to wipe out lingering views "that are still clinging to the increasingly errant-looking forecasts of coming Fed rate cuts in 2007," he said.
Dark clouds, however, loomed over the China trade picture, with data showing the gap with the biggest purveyor of low-cost consumer goods jumping 12.3 percent in April to 19.4 billion dollars.
"The US trade deficit with China is out of control. It is a key reason why the United States has lost more than three million manufacturing jobs since 2001," said American Manufacturing Trade Action Coalition executive director Auggie Tantillo.
"The years of Bush administration talks with China have produced negligible results. Congress now must forcefully act." Elsewhere, the deficit also widened with the 12 members of the Organisation of the Petroleum Exporting Countries, rising 13.6 percent to 9.8 billion dollars.
The gap shot up 17.1 percent with the 27-nation European Union to 9.0 billion dollars, including a 7.6 percent rise with EU powerhouse Germany to 3.8 billion dollars.
With Canada, the shortfall climbed 7.4 percent to 5.8 billion dollars. The deficit trend may be undergoing a correction: in the first four months of the year, the deficit has reached 235.3 billion dollars, down from 252 billion in the same period in 2006.
If it continues, the United States could be on track to post a decline in the trade gap in 2007, for the first time in six years. However, analysts were unsure whether the April data has staying power.
"The demand outlook in the US or abroad has not changed so substantially that a very large ongoing improvement in the trade balance should be expected near term," said Steven Wieting of Citi Economic and Market Analysis.

Copyright Agence France-Presse, 2007

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