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©AFP/File / Hector Mata

The trade deficit shrank to 37.3 billion dollars down from a revised 39.9 billion dollars

WASHINGTON (AFP) - The US trade deficit narrowed unexpectedly in January as imports and exports declined and overall volume fell for the first time in five months, the government reported Thursday.

The Commerce Department said the trade deficit shrank to a seasonally adjusted 37.3 billion dollars, from a downwardly revised 39.9 billion dollars in December.

The figures surprised most analysts who had expected the trade shortfall would increase to 41.0 billion dollars.

"The recent roller-coaster ride in trade news continues with this month's release, though the overall trend of slowly growing trade volume continues," said Christopher Cornell at Moody's Economy.com.

Imports dropped 1.7 percent to 180.0 billion dollars, including the lowest level of oil imports in more than a decade, while exports slipped 0.3 percent to 142.7 billion dollars.

Analysts noted the slowing trade flows had come after surges in previous months.

Natixis analyst Inna Mufteeva said the data clouded the outlook for the country's fragile recovery from severe recession that began in December 2007.

"Improvement in US consumption did not impress much the importers as consumer goods imports dropped 2.3 percent in January," she said.

Consumer spending accounts for two-thirds of US economic activity and is considered key to sustainable growth in a budding recovery that so far has been propped up by government spending.

US trade volume with the rest of the world declined for the first time since August, by 1.1 percent from December, the data showed.

"We are inclined to view it as a seasonal adjustment or weather story, or both, and we expect trade flows to rebound strongly in February," said Ian Shepherdson at High Frequency Economics.

©AFP/Getty Images/File / Joe Raedle

The January deficit surprised most analysts who had expected the trade shortfall would increase to 41.0 billion dollars

The lower January deficit was partly due to crude oil imports that slumped to their lowest level since February 1999, at 245 million barrels.

The gap in petroleum products, however, again weighed heavily on the trade balance, though it narrowed to 22.7 billion dollars in January from 23.6 billion dollars the previous month.

The average price of imported oil jumped to 73.89 dollars, its highest peak since October 2008.

In unadjusted data, the trade deficit with Canada, the largest US trading partner, grew to 3.9 billion dollars, marking the biggest gap since October 2008.

The deficit with Mexico narrowed to 4.6 billion dollars from 5.2 billion dollars.

The politically sensitive trade deficit with China edged up to 18.3 billion dollars from 18.1 billion in December.

"Do not expect the situation to last," warned Moody's Cornell, after China reported February trade data Wednesday showing exports soared for the third straight month and at their fastest pace in three years.

"These will be reflected in the US trade data for February, set for release next month," he said.

The country's massive trade gap with China, by far its largest with any trading partner, is an underlying source of friction in bilateral trade ties.

Critics accuse Beijing of keeping its yuan currency undervalued to maintain a trade advantage.

President Barack Obama Thursday called on China to embrace a "market-oriented" exchange rate for its yuan currency, according to an advance copy of a major speech on trade he was due to deliver later in the day.

"China moving to a more market-oriented exchange rate would make an essential contribution" to efforts to rebalance imports and exports in the global economy, he said.

The US trade deficit narrowed with other major trading partners: to 3.3 billion dollars with Japan and 2.8 billion dollars with the European Union.

©AFP / Martin Bernetti

Chilean President Sebastian Piñera, accompanied by his wife Cecilia Morel

VALPARAISO, Chile (AFP) - A 7.2-magnitude aftershock and four other tremors rocked disaster-hit Chile Thursday, triggering a tsunami alert just minutes before billionaire Sebastian Pinera was sworn in as the new president.

The quake was the strongest aftershock of more than 200 which have shaken the South American nation since the massive 8.8-quake of February 27 which sparked a killer tsunami and left almost 500 confirmed dead.

The latest aftershock was centered 114 kilometers (71 miles) south of Valparaiso, where it caused some to flee in panic from the Chilean parliament as right-wing tycoon Pinera prepared to take over power.

"I swear," Pinera said as he took the oath of office, inheriting the presidential reins from popular leftwing leader Michelle Bachelet and now facing the huge challenge of rebuilding the nation.

But parliament was evacuated shortly afterwards as Chile still reels from one of the largest earthquakes ever recorded.

The National Emergency Office, sharply criticized for its slow reaction to February's deadly quake, swiftly issued a tsunami alert for central areas of Chile, including Valparaiso.

But Haiwaii-based The Pacific Tsunami Warning Center said there was no threat of a "destructive widespread tsunami."

©AFP / Claudio Santana

Presidents Evo Morales of Bolivia (left) and Fernando Lugo of Paraguay

Pinera's first task as president was set to be a visit to the ravaged coastal town of Constitucion, one of the worst hit by last month's quake and the giant waves that followed, that left some two million homeless.

It was not immediately clear whether the latest strong aftershock would alter his plans.

Pinera's January victory spelled an end to the ruling left-wing coalition that has governed Chile since the end of General Augusto Pinochet's dictatorship 20 years ago.

But his presidency will be marked by the aftermath of the quakes.

"We won't be the government of the earthquake, we'll be the government of reconstruction," Pinera said recently, naming five new governors in each of the worst-hit central regions.

The 60-year-old not only faces the challenge of reconstruction -- which analysts estimate could cost up to 15 billion dollars -- but also takes over from a highly popular outgoing leader.

Bachelet scored an 84 percent popularity rating in a post-quake survey, even amid criticism of a slow government reaction to the disaster.

Bachelet on Wednesday issued a farewell statement boasting that her left-wing Concertacion coalition had in the past 20 years turned Chile into "a country of high credibility."

©AFP / Simon Uribe

A supporter of Chile's President Michelle Bachelet holds a newspaper

Pinera, a self-proclaimed centrist, has promised he will build on the policies practiced by his predecessor, rather than replace them.

After vowing austerity during his campaign, he was now expected to ramp up spending, borrow abroad and dip into savings from export revenues from the key copper mining industry.

During his campaign, Pinera deflected accusations of potential conflicts of interest between his political ambitions and his corporate empire, promising to sell the bulk of his shares in airline LAN Chile before taking office.

He also successfully put a distance between himself and Pinochet's dictatorship, which had enjoyed the backing of several right-wing parties now behind the billionaire.

Although Chile's economy shrank two percent last year, its first contraction in a decade, it was forecast before the quake to grow between 4.5 and 5.5 percent this year.

Pinera -- who had pledged to boost annual growth to six percent as the Latin American model of economic success emerged from the financial crisis -- was now under pressure to rebuild the nation.