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The Honolulu Advertiser
Posted on: Wednesday, June 11, 2008

U.S. trade deficit at highest level since March last year

By Martin Crutsinger
Associated Press Economics

Hawaii news photo - The Honolulu Advertiser
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WASHINGTON — The trade deficit soared to the highest level in more than a year as an improvement in exports was swamped by record-high levels of imported crude oil. The deficit with China also rose sharply.

The gap between what the nation imports and what it sells abroad rose by 7.8 percent in April to $60.9 billion, the Commerce Department reported yesterday. It was the largest imbalance since March 2007.

The higher deficit was driven by a $4.3 billion increase in crude oil imports, which jumped to a record $29.3 billion in April, as the average per-barrel price rose to an all-time high of $96.81.

If the price of crude had instead been at $60 per barrel, about where it was a year ago, the trade deficit would have been $11 billion lower in April. Analysts cautioned the deficit will widen further in coming months, given that oil is now trading at more than $130 per barrel.

In April, U.S. export sales totaled $155.5 billion, up 3.3 percent to an all-time high, reflecting big gains in sales of commercial aircraft, farm machinery, medical equipment and computers. But this increase was swamped by a 4.5 percent rise in imports, which also set a record at $216.4 billion. In addition to oil, there were huge gains in imports of autos and consumer goods.

The trade deficit through the first four months of this year is running at an annual rate of $707.5 billion, up slightly from last year's deficit of $700.3 billion, which was a 7 percent drop from 2006. The improvement last year followed five straight years of trade imbalance records.

Many economists are looking for the deficit to shrink again this year, reflecting a significant economic slowdown in the United States, which is cutting into demand for imports and the weak dollar, which has helped boost U.S. exports.

Exports are the standout performer at the moment in an economy beset by a prolonged slump in housing, a severe credit crunch and rising unemployment.

Nigel Gault, chief U.S. economist for Global Insight, predicted foreign trade would add about 1 percentage point to economic growth in the current quarter, helping to keep overall growth slightly above zero and avoiding a negative reading that could be a sign of recession.

The politically sensitive deficit with China shot up by 25.9 percent in April to $20.2 billion, the highest level in three months, reflecting increased imports of Chinese products, from toys and games to televisions, electrical appliances and clothing.