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Last Updated: Thursday, 12 October 2006, 21:37 GMT 22:37 UK
US trade deficit surges in August
US President George W Bush visiting a factory
The size of the deficit has become a political, not just economic, issue
The US trade deficit widened by more than expected during August, raising concerns about the state of the world's largest economy.

The deficit was $69.9bn (37.7bn) in August, up from July's $68bn level, the US Commerce Department said.

The deficit is on course to set a new record, totalling $784.2bn at the end of August, 9.4% higher than a year ago.

One of the main causes of the shortfall has been high oil prices, which have pushed up petroleum import costs.

The total value of imports rose by 2.4% to $192.3bn in August, while exports rose by 2.3% to $122.4bn.

During August, the politically charged trade deficit with China rose by 12.2% to a monthly high of $22bn. The is on course to top last year's record figure of $202bn.

'Bad figure'

Following the announcement, some analysts said that they would have to rework their economic growth forecasts for the three months to the end of September.

"It is a pretty bad figure," said David Sloan of 4Cast in New York. "We now expect to see a pretty weak third quarter growth figure, significantly below 2%."

However, analysts said that a 25% drop in the price of crude oil since August would mean an improvement in the deficit later this year because import costs would have declined.

But that may come too late to help Mr Bush and his Republican party in the mid-term elections scheduled for November, analysts said.

Democrats are arguing that the size of the budget deficit, and especially the shortfall with China, are evidence that the Bush administration is mishandling trade and economic issues.

At the same time there are concerns about the housing and labour markets.

The Commerce Department also released unemployment figures on Thursday, showing that the number of new applications for unemployment benefit rose by 4,000 last week to 308,000.

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