Weak American demand for everything from oil to automobiles led to shrinking imports, which fell faster than exports, reducing the gap by 9.7% to $36 billion, compared to the $38 billion Wall Street expected, the Commerce Department said Friday in Washington.

“The narrowing reflects the ongoing economic downturn. U.S. consumers are pulling back and that’s resulting in fewer imports while exports are falling,” Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pa., told Reuters. “It reflects how bad economic conditions are everywhere.”

For the first time since 1982, total world trade is expected to decline this year as businesses and consumers cut back on spending in response to relentlessly poor economic news. Even China chimed in early this week reporting its exports plunged 25.7% in February from a year earlier, while imports declined 24.1%.

The narrower gap is bad news for the U.S. economy because it mainly reflects a drop in petroleum prices. Excluding petroleum, the deficit was little changed at $21.3 billion.

The numbers used to calculate gross domestic product (GDP), which eliminates the influence of prices, showed the trade deficit widened to $44 billion, the most since October, Bloomberg News reported.

Imports slid 6.7% to $160.9 billion, the least since March 2005, led by a $4.3 billion drop in crude oil purchases. Foreign automobile sales plunged by $3.3 billion.

The Organization of Petroleum Exporting Countries (OPEC) deficit dropped to $3.9 billion, the smallest since November 2003, and the gap with Japan plummeted to the lowest level since 1998.

The shortfall with the European Union was sliced by half from $7 billion in December to $3.5 billion in January.

The largest concern for the United States is the dive in exports, as foreign demand for American-made goods slackened. Exports plunged 5.7% to $124.9 billion, the lowest in two and a half years, as sales of automobiles, computer chips, telecom equipment and drilling gear dropped, the report showed.

U.S. exports of food, feeds and beverages were up marginally in January, but important categories like consumer goods, capital goods and industrial supplies all showed declines.

“It’s not a good report for U.S. manufacturing,” Julia Coronado, a senior U.S. economist at Barclays Capital Inc. (BCS) in New York, told Bloomberg. “This is certainly a sign that the global weakness is feeding into the domestic economy through the export channel.”

After shrinking at an annual rate of 6.2% in the fourth quarter of 2008 – the most since 1982 – U.S. GDP is forecast to contract further this quarter. The collapse in U.S. exports led to a widening in the trade gap that subtracted 0.5% from growth last quarter.

Source: Economic Slump Narrows U.S. Trade Gap to Lowest Level in Six Years

Crude’s advance on Tuesday stemmed from Wall Street gains sparked by reassuring comments from Fed Chief Ben Bernanke, while President Barack Obama said the United States would emerge stronger from the economic slump.

“The equities rally is supporting the market,” said Tony Machacek, a broker at Bache Commodities Ltd.

U.S. crude was up 20 cents to $40.16 by 0948 GMT. Brent , trading at an atypical premium to U.S. crude because high U.S. inventories are weighing on the U.S. benchmark, was up 1 cent to $42.51.

Oil has fallen from a record high near $150 reached last summer, battered by the recession and weakening global fuel demand which forecasters such as the International Energy Agency predict will contract in 2009.

The price of oil has become closely intertwined with equities, a barometer of economic sentiment, in recent months. European stocks were up more than 1 percent on Wednesday, following gains in Asia.

Bernanke signaled on Tuesday that U.S. banks should be able to weather the downturn without being nationalized. But Obama tempered his message of hope with a warning that America faces a “day of reckoning” for its past excesses.

Attention will focus later in the session on the latest snapshot of oil supplies in the United States.

The U.S. Energy Information Administration releases its weekly inventory report at 1530 GMT, which is expected to show that crude stocks probably rose 1.4 million barrels last week.

American Petroleum Institute data on Tuesday showed crude stocks rose 341,000 barrels last week. Oil traders consider the EIA data gives a fuller picture because energy firms are required to respond to its weekly survey.

Also supporting oil were figures earlier this week showing higher-than-expected compliance by the Organization of the Petroleum Exporting Countries to agreed production cuts.

OPEC oil ministers meet to set policy on March 15, and the group is expected to consider deepening its output cuts.

LONDON, Feb 25 (Reuters)

• Shareholders of The Bear Stearns Cos. Inc. (BSC) approved the government-assistant $2.3 billion acquisition by JPMorgan Chase & Co. (JPM), Bloomberg reported. The all-stock deal is expected to close today (Friday), though shareholders who sought more than the buyout’s price of $10-a-share may file suit.

• Shares of Sears Holdings Corp. (SHLD) – owner of Sears and K-Mart department stores – dropped 3.6% yesterday (Thursday) as the company posted a net loss of $56 million, or 43 cents a share, for the quarter ended May 3. “Given that we do not expect any significant near-term improvement in the overall retail environment, we believe that our sales and gross margin for the balance of fiscal 2008 will continue to be pressured,” the company said in a statement.

• Meanwhile, the same economic slump that’s crippling Sears has benefited warehouse retailer Costco Wholesale Corp. (COST), which posted a estimate-beating profit gain of 32% for its fiscal third quarter, Reuters reported. Net income was $295.1 million, or 67 cents a share, as shoppers took advantage of its members-only discounts on clothes, gasoline, food and big-ticket items such as televisions and furniture.

• Taiwan’s economy grew an estimate-beating 6.06% for the first quarter, as exports grew more than expected and consumer spending continued its strength. Bloomberg reported that Taiwan joins Japan, Hong Kong and Malaysia in having reported GDP growth that exceeded expectations.

• General Motors Corp. (GM) announced yesterday (Thursday) that 19,000 workers accepted voluntary buyouts, MarketWatch reported, as the struggling automaker looks to cut costs. The departing employees represent 24% of GM’s Auto Workers Union-represented staff.

Source: Global Investing Roundups Friday, May 30th, 2008