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The Commerce Department reported today due dried up demand for imported goods of all sorts in February the U.S. trade deficit narrowed to $26 billion, the smallest since 1999.

Although imports of goods and services fell 5.1% in February to a seasonally adjusted $152.7 billion, the lowest in more than four years, exports of goods and services rose 1.6% to $126.8 billion, the first increase since July, surprising economists.

The January trade deficit - the difference between the value of imports and exports - was revised higher to $36.2 billion from $36 billion so the February deficit was much smaller than the $36.2 billion forecast by economists. Even with this surprise in the trade deficit narrowing it is still down 58% in the past year, with imports falling 29% and exports down 17%.

Some of the improvement in the trade gap reflects lower prices, especially for imported petroleum. The average price of an imported barrel of crude oil fell to $39.22 in February, the lowest in four years and down from $84.76 a year earlier.

The surprising strength in exports will probably mean economists' will revise their forecast upward for first-quarter growth. Currently, economists are looking at a 5.5% annualized decline in gross domestic product for the first three months of the year, compared with the 6.3% decline in the fourth quarter.

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