The US trade deficit narrowed 4.1 per cent in February to $65.7 billion, as imports fell by the largest amount in nearly a year and the trade gap with China shrank 22.7 per cent.
Wall Street analysts had expected weak consumer demand and softer oil prices to trim the monthly trade gap by only $1 billion from the record set in January.
"The narrower trade deficit is a positive piece of news for February. However, with energy prices going up recently, you have to remember that there's a good chance that the trade deficit will widen again over the next months," said Patrick Fearon, senior economist with A.G. Edwards & Sons.
US imports fell 2.3 per cent in February to $178.7 billion, the largest month-to-month decline since March 2005, but still the second highest on record after January.
Many analysts had expected imports to retreat after surging in the first month of 2006. The politically sensitive trade deficit with China narrowed significantly in February to $13.8 billion, the lowest level since March 2005.
February exports to China, at $4.1 billion, were the second highest on record.