WASHINGTON – America's trade deficit hit an all-time high as record imports of oil swamped a solid gain in U.S. exports.
The deficit rose to $69.9 billion in August, up 2.7 percent from July's $68 billion deficit, which had also been a record. The sharp deterioration in the deficit in recent months has occurred because soaring global oil prices have pushed America's foreign oil bill to historic highs.
Analysts believe the deficit will begin to show improvements in coming months, reflecting the fact that oil prices, which had surged to $77 per barrel in July, have fallen by about 25 percent since that time.
In a second report, the number of newly laid off workers filing for unemployment benefits rose by 4,000 last week to a seasonally adjusted total of 308,000.
The widening trade gap occurred even though U.S. exports of goods and services set a record, rising by 2.3 percent to $122.4 billion. This increase, however, was offset by a 2.4 percent rise in imports, which also set a record at $192.3 billion.
The trade deficit is on track to set a record for a fifth consecutive year, running at an annual rate through August of $784.2 billion, 9.4 percent higher than last year's $716.7 billion record.
Democrats, campaigning to wrest control of Congress from the Republicans, contend that the string of record deficits documents failures of Bush administration trade policies that they contend have not addressed unfair trade practices by other nations, particularly China.
The deficit with China shot up by 12.2 percent to a record of $22 billion in August and is running 13.5 percent above last year, when it hit $202 billion, the highest ever recorded with a single country.
Treasury Secretary Henry Paulson, the former head of Goldman Sachs, has made negotiations with China over its currency system and other trade policies a top priority. But it remains to be seen whether his efforts will produce any better results than his predecessors.
American manufacturers contend that China is keeping its currency artificially low against the dollar by as much as 40 percent in order to make Chinese goods cheaper in the United States and American products more expensive in China.
Paulson has argued that China should move more quickly to allow its currency's value to be set by markets but Chinese officials say they are concerned about what such volatility would do to the country's banking system.
For August, the $2.7 billion rise in exports reflected record sales of American farm products and U.S. consumer goods including artwork and antiques.
The $4.6 billion increase in imports was led by a $1.1 billion increase in oil imports, which hit a record high of $29.7 billion. That reflected an increased volume of oil shipments and a record average price of $66.12 per barrel of imported crude, topping the previous record of $64.84 per barrel set in July.
Analysts believe that with spot oil prices falling below $60 per barrel, down from a record of $77 set in July, the oil bill will start to fall, helping to narrow the trade deficit in coming months.
Imports of food products set a record of $6.5 billion in August, topping record U.S. exports of food, which climbed to $6.1 billion.
The U.S. trade deficit with Mexico jumped 22.2 percent to a record of $6.2 billion last month while the deficit with Canada, the other partner in the North American Free Trade Area, rose by 2.5 percent to $6.1 billion.
The deficit with the European Union fell by 17.5 percent to $11 billion while the deficit with Japan dropped 1.3 percent to $7.5 billion.