October 13, 2006	Friday	Ramazan 19, 1427

WASHINGTON, Oct 12: The US trade deficit hit a record $69.9 billion in August owing to a surge in imports of cheap Chinese goods and expensive oil, the government said on Thursday.

Economists said the data would hurt growth in the world's largest economy, which has already been flagging going into the second half of the year, but noted that strong import demand reflected underlying strength.

The commerce department said the shortfall jumped from July's figure of $68 billion, which itself was a new high at the time. Wall Street had expected the deficit to fall to $66.5bn in August.

Exports rose 2.3 per cent in August to $122.4 billion while imports were up a faster 2.4 per cent to $192.3 billion.

The politically sensitive deficit with China jumped 12.2 per cent to $22 billion, a new record, as Americans continued a buying spree of cheap goods from the emerging Asian giant.

That accentuated criticism of Chinese trade policies as US lawmakers gird for elections on November 7, which opposition Democrats hope could see them regain control of one or both houses of Congress.

The American Manufacturing Trade Action Coalition called the figures "disastrous" for US industry and accused the government of inaction.

"Americans are tired of the same old excuses," AMTAC executive director Auggie Tantillo said.

"The US foreign trade deficit keeps rising and the Chinese still manipulate their currency and engage in unfair trade practices to steal jobs from hard-working Americans," he said.

But Societe Generale economist Stephen Gallagher stressed that China has become a reprocessing hub for US-bound imports from other parts of Asia, "so just focussing on China as the culprit ignores the wider picture".

China issued its foreign trade report for September on Thursday, showing a sharp drop in its surplus to $15.3 billion from $18.8 billion in August. But net Chinese exports are safely on track for a record year in 2006.

The deficit in the US petroleum balance also hit a new high of $27.2bn in a month that saw average prices of imported oil reach an all-time peak of 66.12 dollars a barrel. In the first eight months of 2006, the US trade deficit stands at $522.8bn, well ahead of the equivalent figure for 2005 of $457 billion.

The annual deficit is thus on course to smash last year's $717 billion.

"Over time I would expect the deficit to grow. But given the jump we'd already experienced in July, I was surprised to see even a larger jump in August," Gallagher said.

He said the record deficit would trim US growth in the third quarter to about two per cent, compared to 2.6 per cent in the second quarter and a blistering 5.6 per cent in the year's first three months.

"But imports are up because demand remains strong among consumers and businesses alike, so that reflects voracious demand in parts of the US economy," Gallagher added.

BMO Financial Group economist Sal Guatieri noted that oil prices have come down sharply since July and August, which could improve the US trade picture in the coming months.

He agreed that the import surge could be seen as a plus as it "suggests optimism that consumer spending and business investment remain quite healthy".—AFP