THE US trade deficit narrowed in March for a second month as the daily flow of imported crude oil dropped to the lowest level in 17 years. The deficit with China hit a three-year low.

The trade deficit fell to US$38.8 billion, down 11 percent from February's US$43.6 billion, the Commerce Department said yesterday.

Exports fell 0.9 percent to US$184.3 billion as sales of machinery, autos and farm products all declined. Imports fell 2.8 percent to US$223.1 billion, led by a 4.4 percent drop in foreign petroleum. Crude oil imports averaged just 7 million barrels per day, the lowest since March 1996.

A smaller trade gap can boost overall economic growth as American companies earn more from overseas sales while US consumers and businesses spend less on foreign products.

For the first three months of this year, the trade deficit is running at an annual rate of US$507.7 billion, 5.9 percent below last year's gap of US$539.5 billion. Economists are looking for the deficit to narrow slightly this year, in part because they expect continued gains in US exports.

The deficit with China shrank 23.6 percent in March to US$17.9 billion.

The gap with the European Union grew 13 percent in March to US$9.9 billion even though US exports there rose 14.4 percent. But for the year, US exports to Europe fell 8 percent from the same period in 2012, reflecting the impact of a recession in the 17 EU countries that use the euro.

The Institute for Supply Management reported on Wednesday that its index of US manufacturing activity expanded at a slower pace in April, held back by weaker hiring and less company stockpiling. That raised worries that overall economic growth may slow this spring.

The manufacturing index slipped to 50.7 in April. That's down from 51.3 in March and the slowest pace this year. A reading above 50 indicates expansion.