U.S. trade deficit rose to $59 billion in August

Energy costs increass sharply

gap with China expanded 4.65 percent, to $18.5 billion


The nation's trade deficit worsened in August, all but erasing a brief improvement in July, the government reported yesterday. Another report showed that import prices surged last month as the cost of oil, natural gas and other energy products soared after the two severe hurricanes hit the Gulf Coast.

Americans imported $59 billion more in goods and services than they exported in August, up 1.8 percent from July, with the growth largely driven by bigger and more expensive imports of energy commodities, Commerce Department reported.

Exports of airplanes, cars, chemicals and soybeans increased but not enough to offset larger energy imports.

The Labor Department said that import prices rose 2.3 percent in September, the biggest monthly increase since October 1990. Petroleum prices rose 7.3 percent, and natural gas costs soared 28.8 percent in the aftermath of Hurricanes Katrina and Rita. Prices for imports excluding fuels rose a more modest 0.4 percent.

Compared with September 2004, import prices were 9.9 percent higher last month, and petroleum import prices were 48.9 percent higher.

The two hurricanes disrupted oil and natural gas production and distribution, driving energy costs up to new records in September.

Imports of those commodities rose in the aftermath of the devastation to make up for the shortfall of domestic production, indicating that the trade deficit may have worsened further last month.

"There is an imbalance in terms of the demand and supply of energy which continues to be satisfied, or is increasingly satisfied, by external sources of energy products," said Brian A. Bethune, an economist at Global Insight, a research firm. "Now, we have a situation that has been even more complicated because of a domestic supply shock."

That is not to say that exports have been sluggish. For much of the year, they have been growing at a faster pace than imports, but because exports are increasing from a smaller base the deficit has increased. So far this year, the trade deficit has averaged $57.9 billion a month, 16.7 percent higher than the monthly average at this time in 2004.

The picture improves when petroleum products are removed from the calculation. Excluding those goods, the trade deficit narrowed to $41.7 billion in August, from $42.8 billion in July. The average monthly deficit without petroleum goods was 11 percent higher in the first eight months of the year compared with the eight-month period in 2004.

Economists say the market for American goods and services is improving in places such as Canada, Japan and even Europe. "The major markets overseas - Europe, Japan and Asia - have fairly solid underlying momentum," Bethune said. "Japan is certainly improving, and Europe is more like the Queen Elizabeth slowly turning around."

The much-watched trade deficit with China, however, expanded 4.6 percent, to $18.5 billion in August.

Separately, the Labor Department reported yesterday that the number of people filing new claims for unemployment benefits last week fell slightly to 389,000 when adjusted for seasonal variations.

An estimated 75,000 jobless claims on a non-seasonally adjusted basis were filed by people affected by the hurricanes, bringing the total of those claims to 438,000 since Hurricane Katrina made landfall in late August.

In an encouraging sign, unemployment claims outside of the region affected by the hurricanes have stayed low. Total unemployment claims last week fell by 2,000 to 389,000.

Excluding the hurricane-related claims, unemployment claims have continued to fall in recent weeks and are lower than they were this time last year. That seems to echo the data from last week's employment report, which showed that the total number of jobs fell by 35,000 in September, far less than many had feared.

In addition, 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.

"So far, the data on the economy show that other than the plunge in consumer confidence, there has been relatively little weakening in the underlying trend" because of the hurricanes, said James O'Sullivan, an economist at the investment bank UBS.

Economists warn that it may take some time to fully gauge the hurricanes' full impact. They will get more data today, when the government reports on consumer prices and retail sales.

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