US trade deficit swells, gap with China hits new record

October 14, 2010
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, WASHINGTON, Oct 14 – The US trade deficit jumped almost nine percent in August, much worse than expected, as the gap with China swelled to a new record high, government data showed Thursday.

The Commerce Department reported the August trade deficit rose to 46.3 billion dollars in August, up from a downwardly revised July deficit of 42.6 billion dollars.

The August trade gap was far worse than economists predictions that it would widen to 44.5 billion dollars. In July the deficit had narrowed.

Despite an increase in exports of goods and services, which reached their highest level since August 2008, imports surged more strongly, the data showed.

Imports increased 2.1 percent from July, to 200.2 billion dollars, while exports edged up 0.2 percent to 153.9 billion dollars.

The August trade deficit was the worst since June\’s 49.8-billion-dollar gap, the biggest since October 2008 as the global financial crisis accelerated, and confirmed a trend of widening gaps that began in mid-June 2009.

The US surplus in services, a key trade strength of the world\’s largest economy, shrank for the third consecutive month as imports of services reached a record high.

Americans\’ dependence on foreign oil and appetite for imported consumer goods once again caused imports to swell.

In August, exports of goods were virtually flat, while imports of goods jumped 3.9 billion dollars to 166.7 billion. Imports of consumer goods led the increase, rising by 1.4 billion dollars.

The politically sensitive gap with China expanded eight percent to a new record of 28.0 billion dollars, wiping out the previous record of 27.9 billion dollars in October 2008.

President Barack Obama\’s administration has pledged to increase exports as a main driver to stimulate growth and achieve a sustainable recovery from the worst recession in generations.

The United States also is a leading critic of China\’s currency policy, accusing Beijing of keeping the yuan undervalued to gain an unfair trade advantage.

In the second quarter, the trade deficit subtracted 3.5 percentage points of growth from gross domestic product, the measure of the nation\’s output of goods and services, the biggest loss since 1947.

Patrick O\’Hare at Briefing.com said the August trade report "suggests net exports will be a drag on third-quarter GDP."

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