Trade deficit shrinks as auto and oil imports drop

WASHINGTON - The U.S. trade deficit unexpectedly shrank in January, reflecting a big drop in imports of oil and foreign cars. American exports also fell, a potential blow to hopes that the economic recovery will be aided this year by U.S. sales abroad.

The Commerce Department said that the trade deficit declined to $37.3 billion in January, a drop of 6.6 percent from a revised December deficit of $39.9 billion. Economists had been expected the deficit to widen to $41 billion.

U.S. exports dipped 0.3 percent, reflecting weaker sales of a wide variety of products from civilian aircraft and machinery to agricultural products. But imports dropped by a larger 1.7 percent as both oil and foreign cars saw big declines.