US trade gap widens as oil soars

Imports to the US are continuing to outstrip US exports

The US trade deficit widened by 6.1% in June to $58.8bn (£32.5bn), as the soaring cost of oil boosted imports to the world's biggest economy.

The monthly trade gap grew from May's $55.4bn figure, the US Commerce Department reported.

Analysts had predicted June's trade gap would be in the region of $57.3bn, as the stronger dollar hit US exports.

Petroleum imports to the US hit a record $19.9bn, with average oil prices in the month reaching $44.40 a barrel.

The trade gap was a little bit wider than expected in June ... imports were driven up by petroleum Patrick Fearon, economist

However, the price of oil has since reached fresh record levels on the back of security fears and US refinery stoppages, touching $66.15 in US trade on Friday.

Overall, US exports rose slightly to a record $106.8bn in June, but imports climbed to $165.6bn, the Commerce Department said.

Crude effect

"The trade gap was a little bit wider than expected in June but the dynamics were pretty much as expected; imports were driven up by petroleum," said Patrick Fearon, economist at AG Edwards and Sons said.

As a result of increasing demand imports from countries in the oil producing cartel Opec jumped 4.6% from a month earlier to a record $10.3bn during the month.

Experts have warned that high oil prices could crimp US economic growth as costs mount for US consumers and businesses.

On Thursday US Treasury Secretary John Snow warned that "there's no doubt about the fact they create headwinds for the economy".

If such high prices persist, "they clearly will have some negative effects" on gross domestic product (GDP) growth he added.

"We'll probably be looking at second-quarter GDP growth coming in at 3.7% percent rather than potentially the 4.0% we were looking for," Lehman Brothers senior economist Drew Matus said.

Import records

A Labor Department report underlined the effect of rising crude prices, as it revealed crude prices also triggered a rise in the cost of imports in July leaving prices up 7.7% on the year.

Meanwhile, non-petroleum import prices fell for the third month in a row.

Away from the oil market Chinese imports were another major factor pushing the deficit close to June's record of $60.1bn.

The deficit with the country - which is currently causing a major headache for the US trade department - climbed to a new highs of $17.6bn as imports hit a record $21bn, almost a third of the deficit.

In particular the US textile industry is suffering in the face of surging imports since worldwide quotas were abolished at the beginning of this year.

Official figures show Chinese textile imports to the US have surged 54% year-on-year - prompting the country to bring in special "safeguard" limits on Chinese garments under World Trade Organisation rules.

Elsewhere imports from Mexico, Canada and South Central America also hit new highs.