The US trade deficit jumped to the second-highest level in history as surging demand for foreign oil swamped a small gain in US exports, the government reported. The US' trade gap with China hit an all-time high as retailers stocked up on cell phones, toys and televisions in preparation for Christmas sales.
The worse-than-expected trade performance in August -- a deficit of US$54 billion -- represented a 6.9 percent widening from July's trade gap of US$50.5 billion. The record monthly deficit was set in June at US$55 billion.
Exports, helped by a rise in shipments of commercial aircraft and record foreign sales of US cars and auto parts, rose by a slight 0.1 percent to US$96 billion in August.
However, this improvement was overwhelmed by a 2.5 percent surge in imports to a record US$150.1 billion as the US' foreign oil bill climbed to the highest level in history. The average price for crude oil imports in August jumped to a 23-year high of US$36.37 per barrel.
Analysts said Thursday's bad news on trade will only get worse in coming months given that oil prices have continued to soar, with crude oil hitting a new record of US$54.76 per barrel Thursday.
"The skyrocketing oil prices are sucking the wind out of the economy," said Joel Naroff, chief economist at Naroff Economic Advisors. "And the worst is yet to come."
In a second economic report, the Labor Department said the number of Americans filing new claims for unemployment benefits rose by 15,000 last week to a seasonally adjusted level of 352,000. The four-week moving average of claims, which smooths out weekly changes, rose by 4,000 to a seven-month high of 352,000.
The jobless claims report reflects a labor market that is continuing to disappoint economists' expectations. The country added a lower-than-expected 96,000 jobs last month as the unemployment rate held steady at 5.4 percent.
The economy raced ahead at a 4.5 percent growth rate in the first three months this year before slowing to a 3.3 percent growth rate in the April-June quarter as surging oil prices sent the trade deficit soaring and took a big bite out of consumer spending.
For the year, the US trade deficit is running at an annual rate of US$590 billion, 19 percent higher than the previous record, last year's US$496.5 billion imbalance.
Democrats contend President George W. Bush's failed economic policies have pushed the country back into a period of twin deficit troubles with the economy buffeted by runaway federal budget deficits which increase domestic demand and send the trade deficit soaring.
The administration announced Thursday that the federal deficit hit a record US$413 billion for the 2004 budget year, which ended Sept. 30. That is up 9.5 percent from last year's record of US$377 billion.
Democratic challenger Senator John Kerry has pointed to the string of record trade deficits run up since Bush took office as evidence that the administration has failed to protect US workers from unfair trade practices engaged in by low-wage countries such as China.
Even trade in services, normally the US' strength in international markets, sank in August to a surplus of US$3.4 billion, 19 percent below July and the smallest surplus since this trade series began in 1992. The big decline was blamed on US television payments to broadcast the Olympic games.
The US has lost 2.7 million manufacturing jobs over the past four years and some sectors vulnerable to foreign trade such as textiles have been particularly hard hit.
A coalition of textile groups asked the administration on Tuesday to limit imports of textiles from China, timing the filing of its case to force the administration to make a preliminary ruling by Nov. 1, the day before the election.
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