The US trade deficit shrank in December to its narrowest in nearly three years, suggesting the economy did much better in the fourth quarter than initially estimated.

The country's trade gap narrowed to $38.5 billion (€28.8 billion) during the month, the Commerce Department said today. Analysts polled by Reuters had expected a deficit of $46 billion.

That suggests the US government will revise upward its advance reading for fourth-quarter gross domestic product, which showed the economy contracted at a 0.1 per cent annual rate in part because of a decline in inflation-adjusted exports.

The government had released its estimate for fourth-quarter GDP before the December trade data was available. That GDP report suggested the government was projecting a wider trade deficit in December.

Today’s data showed US exports surged by $8.6 billion during the month, boosted by sales of industrial supplies, including a $1.2 billion increase of non-monetary gold.

In a reflection of a boom in oil output driven by hydraulic fracturing technologies, petroleum exports rose by nearly $1 billion during the month to a record high level.

A fall in petroleum imports led overall purchases from abroad to decline $4.6 billion in December. For the entire year, the country's imports of crude oil fell to their lowest levels since 1997 in terms of volume.

For all of 2012, the US trade gap fell by 3.5 per cent to $540.4 billion. But rising exports are helping it to be less of a drag than in prior years.

Exports last year rose 4.4 per cent.

Reuters