The February trade gap totaled $42.1 billion, down more than three percent from January and slightly below analysts' pre-report expectations of $42.5 billion.
US exports leapt four percent - the highest monthly increase since October 1996 - to a record $92.4 billion, while imports rose 1.6% to a record $134.5 billion.
Analysts said the lower-than-expected trade gap should boost forecasts for first-quarter US economic growth toward a five percent annual rate.
"The economy is recovering. The narrower it (the trade deficit) comes, the better it is for economic growth. The first quarter is going to be pretty good," said Anthony Chan, chief economist at Banc One Investment Advisors in Columbus, Ohio.
The politically sensitive trade gap with China fell nearly 28% in February as imports from that country slipped to $11.3 billion, the lowest level in nearly a year, and exports to China rose 17% to $3.0 billion.
China's own figures, released earlier this week, showed it running a $7.9 billion trade deficit in the first two months of 2004, after a $25 billion surplus for all of 2003.
The lower dollar appeared to help all categories of exports, as shipments of industrial supplies and materials and autos and auto parts both set records. Exports of consumer goods were only slightly below the record set in November and exports of capital goods, such as aircraft and industrial machines, were the highest since May 2001.
Exports of services, which include travel, also set a record.
Meanwhile, the surging US economy sucked in record agricultural and industrial imports, while auto and auto parts imports had their second best showing.
However, oil imports fell to their lowest level since February 2003, while average oil prices rose for the fourth consecutive month to $29.17 per barrel.
Despite the monthly improvement in the trade deficit, analysts have said it could take several quarters to see a permanent improvement, in part because the weaker dollar and production cuts by the Organization of Petroleum Exporting Countries have driven up the cost of petroleum imports. (Reuters)
