The US economy likely expanded slightly in the fourth quarter, according to data yesterday that suggested a surprise drop in gross domestic product (GDP) reported by the government last week was overstated.

The US trade deficit narrowed to its lowest point in nearly three years in December on a drop in oil imports and a surge in exports.

The country's trade gap narrowed to $38.5 billion during the month, Commerce Department data showed yesterday. That was a much smaller deficit than analysts had expected.

"Trade data for December paint a reassuring and encouraging picture of the US economy at the end of last year," said Markit chief economist Chris Williamson.

A separate report from the Commerce Department showed wholesale inventories unexpectedly declined in December, which offsets some of the gains to GDP from trade.

Taken together, the two reports suggest the US government could revise upward its advance reading for fourth-quarter GDP, which showed the economy contracted at a 0.1 per cent annual rate.

The decline in GDP was driven by an expected drop in exports, smaller gains in inventories and a plunge in government spending on the military.

Barclays said even with December's decline in wholesale inventories, GDP likely expanded 0.3pc in the fourth quarter thanks to the higher export numbers in yesterday's trade report.

US exports increased $8.6bn in December, boosted by sales of industrial supplies, including a $1.2bn rise of non-monetary gold.

In a reflection of America's current boom in the output of oil and natural gas, petroleum exports rose by nearly $1bn during the month to a record high level.

A fall in petroleum imports led overall purchases from abroad to decline $4.6bn in December. For the entire year, the country's imports of crude oil fell to their lowest levels since 1997 in terms of volume.

Prices for US stocks rose as investors were impressed by a batch of strong trade data, which included the US figures as well as readings showing stronger exports and imports in China during January. Prices for US government debt fell.

For all of 2012, the US trade gap fell by 3.5pc to $540.4bn. Running trade deficits means the country bleeds dollars, so trade is still a drag on the US economy. But rising exports are helping it to be less of a drag than in prior years.

Exports last year rose 4.4pc.

While the overall trade deficit shrank, it grew with China during the year. That raised hackles from American manufacturers who want the US to pressure the Asian giant more to strengthen its currency.

"Congress and the administration must take on currency manipulation," said Alliance for American Manufacturing president Scott Paul.

But even the figures on China had a silver lining. While US imports last year from China increased to a record high, so did America's exports to the country.

America's December trade deficit with China for goods, which was not seasonally adjusted, narrowed by $4.5bn on a drop in imports.

Also in December, US wholesale inventories unexpectedly fell as car dealers and agricultural suppliers drew down their stocks.

The Commerce Department said stocks of unsold goods at US wholesalers dropped 0.1pc during the month and grew less than initially estimated in November.

Economists had expected wholesale inventories to rise 0.4 per cent.-Reuters