U.S. trade deficit surges all-time high in August

Thursday was the day which witnessed many numbers soaring record high beyond the expectations. Besides Dow Jones Industrial Average, Wall Street also set the record high.

The U.S. trade deficit (Excess of imports of goods over the exports of goods, resulting in a negative balance of trade) set a record of US$69.9 billion in August, up 2.7 percent from a US$68 billion deficit in July, boosted by surging oil prices, the Commerce Department reported on Thursday.

The government report stated that the figure was well above economists' average forecast of a $66.6 billion deficit.

In August, both exports and imports were at record levels but exports of goods and services grew by 2.3 percent to record US$122.4 billion while import growth was a slightly stronger 2.4 percent to US$192.3 billion, also hitting a record.

The Dow Jones industrial average jumped 95.57 points, or 0.81 percent, to close record high at 11,947.70. The Dow also touched an intraday record high at 11,959.63 and is up more than 10 percent in contrast to its low of the year in mid-July.

The Standard & Poor's 500 Index also rallied by 12.88 points, or 0.95 percent, to close at 1,362.83. The benchmark index reached a new 5 1/2-year high of 1,363.76 during the session.

The NASDAQ Composite Index climbed 37.91 points, or 1.64 percent, to close at 2,346.18. The NASDAQ is now just around 29 points within reach of its 2006 high of 2,375.54, hit on April 20.

The wider-than-expected trade deficit came as soaring global oil prices propelled the U.S.'s foreign oil bill to significant highs. As per the Govt. report, the deficit in the U.S. petroleum balance registered 27.2 billion dollars last month, when prices of imported oil reached an all-time high of 66.12 dollars a barrel.

In the first eight months of 2006, the U.S.'s trade deficit stood at 522.8 billion dollars, compared with a 457 billion dollar deficit in the same period in August. The trade deficit for the whole year is on target to overrun last year's 716.7 billion dollars to hit an innovative $800 billion, some 6.5 per cent of gross domestic product, analysts say.

However, the downfall in the oil price since the summer, from its crest of $78 per barrel to $58, should bring some relief, but gains here may be counterpoise by the growing deficit with China. Commerce Department’s figures indicate that the bilateral shortfall rose to $22 billion in August, up from $19.6 billion the previous month.

US imports from China soared to a record of $26.7 billion, overshadowing exports of just $4.7bn. After revelation of the figures, some analysts said that they would have to amend 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%."

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