WASHINGTON -- The U.S. trade deficit narrowed sharply in March as demand for imports fell by the largest amount since the last recession was ending. Analysts forecast that trade would continue to be one of the economy's few bright spots this year.

The March deficit totaled $58.2 billion, down 5.6 percent from February, the Commerce Department reported yesterday. It was a much larger improvement than had been expected.

The smaller deficit was driven by a 2.9 percent drop in imports, which reflected widespread weakness in demand as consumers, battered by a severe housing slump, a credit crisis and soaring gasoline prices, cut back on their purchases of domestic goods and imports. It marked the biggest one-month decline in imports since December 2001.

Imports totaled $206.7 billion in March, down $6.1 billion from the February level, a drop led by a 5.9 percent decrease in America's foreign oil bill. The amount of petroleum shipped into the country declined although the average price for a barrel of imported crude shot up to a record $89.85. With oil prices climbing this week to a trading high above $126 per barrel, the March dip in oil imports was expected to be temporary.

Exports, which have been one of the few strong points in this period of weakness, dipped 1.7 percent in March to $148.5 billion, but that was still the second-highest level on record.

For the first three months of this year, exports were up 17.6 percent over the same period a year ago.

Exports have supported half of the growth that has occurred in the economy in the past year and that is expected to continue as American farmers and manufacturers continue to benefit from a weaker dollar, which makes their goods cheaper on overseas markets.

The politically sensitive deficit with China dropped 12.4 percent to $16.1 billion in March, the smallest level in two years, as U.S. exports to China climbed to the second highest level on record. At the same time, imports of Chinese products dropped sharply, reflecting lower demand for clothes, textiles and toys.

Last year's deficit dropped to $708.5 billion, the first improvement after five straight years of record highs, and economists forecast further improvement this year.