WASHINGTON - America's trade deficit rose unexpectedly in October as a spreading global recession dampened sales of U.S. products overseas and the volume of oil imports surged by a record amount. The deficit with China jumped to an all-time high.
The Commerce Department reported Thursday that the trade deficit rose to $57.2 billion October, 1.1 percent higher than the September imbalance of $56.6 billion. Analysts expected the deficit to decline to $53.5 billion on lower oil prices.
The average price for a barrel of crude oil did drop by a record amount but that was offset by a record surge in the volume of oil imports. That sent the total oil bill up by 3 percent to $37.7 billion.
The politically sensitive deficit with China jumped to a record $26 billion in October as imports of toys, computers and televisions surged. However, with the U.S. and much of the rest of the world now in a recession, China's export-led growth is beginning to falter, raising fears that rising job layoffs at Chinese factories could trigger political unrest among displaced workers in the world's fourth largest economy.
So far this year, the U.S. trade deficit is running at an annual rate of $709.1 billion, up slightly from last year's imbalance of $700.3 billion. Economists believe the deficit going forward will shrink slightly as a recession that began a year ago continues to dampen demand for imports. However, that expected improvement will be offset by lower U.S. exports as overseas demand slows, reflecting recessions in many of America's major markets.
For October, exports of goods and services dropped by 2.2 percent to $151.7 billion, the lowest level since January. The decline reflected weaker sales for American farm products such as corn, wheat and meat, and widespread declines in manufactured goods including aircraft, semiconductors and heavy machinery.
Imports fell by 1.3 percent to $208.9 billion, led by a $921 million decline in imports of autos and auto parts as foreign car companies are being hit by the same downturn that has sent Ford Motor Co., General Motors Corp. and Chrysler LLC to Congress in search of bailout support.
Oil imports bucked the downward trend, rising on a record jump in the volume of shipments. That offset a record decline in the average price for imported crude which dropped by $15.56 per barrel to $92.02.
Oil prices have continued to fall as the global recession dampens demand. Crude oil is trading about $100 below the record of $147 per barrel hit in July. The Labor Department reported Thursday that import prices fell by a record 6.7 percent in November, propelled by a sharp drop in the price of oil and gas. Petroleum import prices fell by 25.8 percent, while the price of other goods dropped by 1.8 percent.
President-elect Barack Obama was highly critical of the Bush administration's trade policies during his campaign, pledging to be tougher in enforcing protections for American workers.
On Wednesday, the Bush administration criticized China for slowing the pace at which its currency was rising in value against the dollar, but announced that it had decided not to cite China as a currency manipulator. A citation would have triggered negotiations between the two nations.
The decision upset American manufacturers who believe that China's undervalued currency is the key reason for the record trade gap between the two countries. A cheaper yuan makes Chinese goods less expensive for American consumers and U.S. products more expensive in China.