Amid all the concern about the subprime mortgage crisis, the contagion to the broader money and credit markets and fears of a full-blown recession in the US, signs of a major improvement in the external balance are getting very little attention. Could the US trade deficit be about to disappear?

The latest monthly data showed the US trade deficit was about $59bn. On an annualised basis, this is just over 5 per cent of gross domestic product, an improvement from the 7 per cent level of not so long ago. Within the details, there are also some impressive signs.