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Last Updated: Monday, 18 September 2006, 18:31 GMT 19:31 UK
Costly oil pushes up US deficit
Barrels of oil
Economists consider the huge US trade imbalance a major problem
Record oil import costs have pushed the US current account deficit to $218.4bn (116.3bn) in the second quarter, a 2.4% increase on the previous period.

The deficit is the broadest measure of US global trade, including investment flows and trade in goods and services.

With world oil prices above $70 a barrel for much of this year, the cost of buying oil pushed import values up 2% to $463.4bn between April and June.

The deficit is equivalent to 6% of total US economic output.

Growth risks

The second-quarter deficit exceeded analysts' forecasts of a figure of about $214bn.

The deficit in goods expanded to $210.6bn from $208bn the previous quarter as a healthy rise in export values to $252.8bn was offset by the oil-driven rise in imports.

The Commerce Department also revised upwards its estimate of the overall first-quarter deficit from $208.7bn to $213.2bn.

Economists consider the huge US trade imbalance and its sizeable deficits with oil exporting countries and Asian nations such as China and Japan as one of the global economy's major problems.

Economic strength?

The International Monetary Fund recently warned that a slowing US economy could hamper global growth next year.

One economist said that by buying US government bonds and other financial assets, countries such as China were essentially bankrolling US consumer spending.

"Some analysts argue that the deficit reflects US economic strength because foreigners find many promising investments here," said Professor Peter Morici, from the University of Maryland.

"The details of US financing belie this argument."

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