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US trade deficit grows to record high in October

The US trade deficit surged in October to a record US$68.9 billion, the government said in a report on Wednesday, as economists warned that the huge trade shortfall could put a brake on economic growth.

Led by a jump in oil imports, the deficit grew 4.4 percent from September and was far ahead of analysts' average estimate of a US$62.8-billion-dollar gap for the month. It is on course to smash last year's record deficit for the full year.

The worsening deficit is expected to drag economic growth down in the fourth quarter. Economists already expect growth to slow from the 4.3 percent pace seen in the third quarter.

The widening especially of the US trade deficit with China, to a record US$20.5 billion in October, also sparked a new round of political recriminations against the administration of US President George W. Bush's .

Lehman Brothers economist Drew Matus said the trade deficit could trim fourth-quarter growth by more than half a percentage point, but stressed that the data are subject to revision.

The big trade gap could also weigh on the US dollar, as it reinforced evidence that the currency is pouring out of the US to feed peoples' desire for imported goods.

Yet the greenback has also benefited in turn as foreign governments, particularly China and Japan, buy US government bonds with the dollars their exporters have earned.

US Treasury Secretary John Snow said much of the driving force behind the ever-expanding deficit was the economy's strength compared with weakness abroad.

"The key to this really is overcoming this large differential growth rate between the US and our trading partners, Europe and Japan," he told reporters.

"If our major industrialized trading partners were growing faster, we wouldn't have that trade deficit that we see today," he said, urging policy reforms in Europe and Japan to drive growth, and therefore demand -- including for imported US goods -- higher.

But John Spratt, a Democratic member of the House of Representatives, demanded the Bush administration take action against China, whose exchange rate regime is accused of creating an artificial boom in Chinese exports.

"These figures are cause for concern and a call to action," he said.

"This mammoth trade deficit means the loss of American jobs by the thousands," he added.

For the first 10 months of the year, the trade gap stands at US$598.3 billion.
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