Oil Prices Drive U.S. July Trade Gap to Record

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Wednesday September 20 9:35 AM ET

Oil Prices Drive U.S. July Trade Gap to Record

By Glenn Somerville

WASHINGTON (Reuters) - Soaring oil prices helped drive the U.S. trade deficit to a new peak of $31.89 billion in July as shortfalls with key North American, European and Asian trade partners set fresh records, the Commerce Department said on Wednesday.

Overall U.S. exports decreased while imports climbed to a new high.

The July deficit, which followed a revised $29.85 billion gap in June, handily surpassed Wall Street economists' forecasts for a $30.72 billion shortfall.

The weakening value of Europe's single currency apparently played a role, making U.S. goods more expensive there as the monthly deficit with western Europe shot up 66.6 percent in July to an all-time high of $7.22 billion.

The bad news on trade was widespread, as the monthly gap with China increased to a record $7.64 billion from $7.22 billion in June, and that with Japan grew to a record $7.52 billion in July from $6.31 billion.

Analysts said prospects for any early improvement in the dismal trade outlook were dim.

``The problem is that with the strength of the dollar and with the oil price rising this trend is not going to turn around,'' said economist Kathleen Stephansen of Donaldson, Lufkin and Jenrette Securities Corp. in New York. She added that deteriorating trade was likely to slow U.S. economic growth as sales overseas weaken.

The shortfall on trade with Canada also hit a record $4.75 billion in July following a $4.08 billion deficit in June.

Total exports decreased to $89.67 billion in July from $90.99 billion in June, while imports gained to a record $121.56 billion from $120.84 billion.

A strong U.S. economy, relatively much more robust than those of many of its trade partners, has helped draw in a growing volume of new products at the same time that foreign sales weakened.

Economist Jeff Palma of UBS Warburg in Stamford, Conn., blamed the sharp rise in the July deficit primarily on the export falloff but added: ``It's also showing the strength of domestic demand (that) keeps pushing imports up.'' Prices for imported crude oil climbed to $27.76 a barrel in July from $26.65 in June, the highest levels since November 1990 amid an oil crisis that followed the Iraqi invasion of Kuwait a decade ago. The cost of energy-related petroleum product imports climbed to a record $10.52 billion in July from $10.32 billion in June.

Commerce said exports of new cars and trucks, capital goods including new commercial airplanes and consumer goods all weakened in July, while imports of oil, new cars and food products increased from June.

The monthly trade deficit with Mexico eased slightly to $2.19 billion in July from $2.28 billion in June and the shortfall with oil-producing members of the OPEC cartel was down to $4.47 billion from $4.58 billion in June.

http://dailynews.yahoo.com/h/nm/20000920/ts/economy_trade_dc_2.html

-- Carl Jenkins (Somewherepress@aol.com), September 20, 2000


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