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Last Updated: Thursday, 13 October 2005, 15:59 GMT 16:59 UK
Oil costs fuel US trade deficit
Chevron refinery in California
The US is importing more oil
The increased cost of importing oil has further swelled the US trade deficit.

The deficit rose 1.8% to $59bn (33.7bn) in August - its third highest monthly sum - as the US spent a record $17.2bn on buying crude oil supplies.

The deficit is expected to rise more substantially in September as Hurricane Katrina's economic impact is reflected in trade data for the first time.

US oil production hit a 50-year low in September as Hurricanes Katrina and Rita hit output in the Gulf of Mexico.

Average oil output totalled 4.197 million barrels last month, its lowest level since 1943.

Katrina effect

Labor Department figures also published on Thursday showed that a further 75,000 people lost their jobs last week as a result of Hurricanes Katrina and Rita.

Those claiming jobless benefits for the first time due to the hurricanes has now risen to 438,000.

Experts said Katrina - which struck New Orleans on August 29 - had had no discernible impact on August's trade figures.

It is going to put a lot of pressure on the U.S. to get China to move further on yuan flexibility
Rebecca Patterson, JP Morgan

Total import growth in total imports outpaced exports during the month, thanks largely to the mounting cost of buying in oil.

The value of total imports rose 1.8% to $167.2bn, eclipsing the 1.7% increase in total exports to $108.2bn.

The average cost of an barrel of imported oil rose to an all-time high of $52.65 in August, pushing the overall US deficit with members of oil producers cartel Opec to a record high.

World oil prices remained above $60 a barrel throughout August, breaking through the $70 barrier after Hurricane Katrina struck land.

Politically sensitive

The politically-sensitive US deficit with China increased a further 4.6% to $18.47bn in August.

Textile imports have surged since the abolition of worldwide quotas were at the start of this year, increasing another 3.1% in August.

Textile workers in China
Chinese clothing imports are fuelling the US trade deficit

The US and China have been unable to reach agreement over new controls for Chinese clothing imports amid claims that cheap goods have forced US manufacturers to cut thousands of jobs.

Analysts said the figures would reinforce US efforts to persuade China to widen the exposure of China's currency, the yuan, to more market forces.

US Treasury Secretary John Snow is expected to press the case for currency reform during talks with Chinese officials on Saturday.

"It is going to put a lot of pressure on the US to get China to move further on yuan flexibility and to the extent that they don't, that's going to raise protectionist rhetoric in Congress," said Rebecca Patterson, currency strategist with JP Morgan in New York.

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