US trade deficit widens

The dollar's fall has helped US exporters

The US trade deficit remained near record levels in May at $41.84bn (£25.6bn), as demand for foreign oil pushed imports higher.

Exports struggled to show growth despite a weaker dollar making US goods cheaper abroad, figures from the Commerce Department showed.

The trade gap was the third highest on record and only slightly wider than the revised estimate of $41.65bn for April.

The May tally was in line with an average estimate of $41.50bn made by analysts before the report.

Weak economy

John Lonski, chief economist for Moody's Investor Service in New York, said the trade gap "was pretty much as expected".

"However, you have to keep in mind that these are pretty big trade deficits.

"And it reflects the fact the global economy is weak, especially global capital spending," he added.

US crude oil imports increased to a record 320.5m barrels in May, Friday's figures showed.

But average prices fell for the third consecutive month to $24.11 per barrel, in the wake of the swift US-led victory in Iraq.

Transatlantic trade

The price drop shaved $800m from the monthly import value, despite the record volumes.

Overall, imports rose slightly to $123.89bn, led by increased demand for foreign cars, car parts and capital goods.

US exports rose slightly to $82.05bn, led by capital goods, cars, auto parts and industrial supplies.

Transatlantic trade declined slightly, a possible result of friction caused by the Iraq war.

US exports to Western Europe dropped about 1.3% to $13.82bn, while US imports from the region fell about 1.6% to $22.08bn.

Interest rates

Meanwhile, rising energy costs pushed up US wholesale prices by a sharper-than-expected 0.5%, according to figures for June released on Friday.

Stripping out volatile food and energy costs, however, core producer prices eased 0.1%, defying Wall Street economists' expectations of a small increase.

Shifts in producer prices, which are often absorbed by companies rather than passed on to consumers, are under scrutiny because of fears about deflation getting a hold on the tepid US economy.

The US Federal Reserve last month cut key interest rates to a 45-year low to fend of deflationary pressures, although policymakers have described the threat as remote.