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Trade deficit soars to $59 billion
WASHINGTON -- The nation's oil bill surged to a record in August and so did goods imported from China, pushing the U.S. trade deficit to the third-highest level ever. And it is bound to get worse because hurricane-related increases for oil are still ahead.
The deficit rose to $59 billion, about $1.1 billion more than the previous month, the Commerce Department said Thursday. There was a big increase in export sales of commercial jetliners, but that was swamped by foreign oil imports.
The number of people put out of work by hurricanes Katrina and Rita climbed by 75,000 last week, the Labor Department reported. The six-week tally since Katrina slammed ashore stands at 438,000 hurricane-related claims.
In an encouraging sign, jobless claims outside of the region affected by the hurricanes have stayed low. Total jobless claims last week fell by 2,000 to 389,000.
Claims from the hurricanes should decline in the coming weeks, but the economic fallout will linger because the storms forced the shutdown of refineries and oil platforms along the Gulf Coast. The lost production has pushed energy prices to record levels, worsening inflation, stifling most consumer spending and driving up the trade deficit.
"Record crude prices usually mean record trade gaps. Nobody sees relief on the energy front any time soon," said Oscar Gonzalez, senior economist at John Hancock Financial Services in Boston.
On Wall Street, the Dow Jones industrial average was basically unchanged, dipping a slight 0.32 point to close at 10,216.59 as investors' worries about inflation were stirred by a sharp rise in import prices, reflecting surging global energy prices.
Economists said this year's trade deficit could exceed $700 billion, far above last year's imbalance of $617.6 billion.
The U.S. deficit with China hit a monthly record of $18.5 billion in August. Imports from China to the U.S. set a record, too, reflecting a further rise in shipments of Chinese clothing and textiles. The deficit with China is 28 percent ahead of last year's pace when it hit $162 billion, the highest level ever with any country.
Political pressure is increasing on the Bush administration to act. In Congress, there is wide support for legislation that would impose 27.5 percent penalty tariffs on all Chinese products unless Beijing allows its currency to rise further in value against the American dollar.
China allowed a 2.1 percent revaluation of the Chinese yuan on July 21, but analysts said that was far too small to have any impact on the U.S. trade deficit.
Treasury Secretary John Snow visited the industrial city of Chengdu on Thursday as part of a weeklong tour of China. Snow is urging the Chinese to undertake faster changes in their currency system, boost domestic demand and allow foreign competition in financial services.
Snow will be joined by Federal Reserve Chairman Alan Greenspan for discussions with the Chinese on Sunday and Monday.
The AFL-CIO's secretary-treasurer said the administration's latest effort at economic diplomacy was "more rhetoric from both governments, with little action." Richard Trumka said the administration should cite China as a currency manipulator in an upcoming report to Congress, a step that could lead to U.S. trade penalties against China.
U.S. and Chinese trade negotiators ended a fourth round of talks in Beijing on Thursday without any reported progress on negotiating a deal to limit imports of Chinese clothing and textile products. Those goods have flooded the U.S. market since the lifting of global quotas on Jan. 1.
U.S. textile manufacturers announced they were filing a petition with the administration that seeks limits on imports of towels from China.
In the absence of comprehensive caps, the U.S. industry has filed -- and the administration has granted -- limits on a category-by-category basis, a process that U.S. retailers contend drives up clothing prices for American consumers.
The $59 billion August gap between what the U.S. sells abroad and what it imports was the third-highest ever and close to the all-time high of $60.4 billion set in February.
The August imbalance was driven higher by a 12.2 percent jump in crude oil imports, which hit a record of $17.16 billion. Total petroleum imports, which includes refined products, also set a record at $22.6 billion in August.
The price for a barrel of crude the foreign oil bill rose to a record average price of $52.65 in August, compared with $49.03 in July.
Analysts said there will be a further jump in the September oil bill, reflecting the rise in crude prices since the hurricanes. This month, the barrel price briefly topped $70.
The Labor Department said in a separate report Thursday that the price of imported goods rose by 2.3 percent in September. The gain, the biggest in 15 years, was driven by a 7.3 percent surge in petroleum prices.
U.S. exports in August rose by 1.7 percent to a record level of $108.18 billion, helped by a surge in commercial aircraft sales that will not be repeated in September.