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Trade Deficit Climbs on Higher Oil Prices

Posted on: Thursday, 13 October 2005, 15:00 CDT

By MARTIN CRUTSINGER

WASHINGTON - The nation's trade deficit rose 1.8 percent to $59.03 billion in August, the third highest in history, driven by higher oil prices.

Import prices climbed by 2.3 percent in September - the biggest one-month rise in 15 years - giving consumers new reasons to fear that inflation is rising and the Federal Reserve will continue to hike interest rates.

The rise in import prices was noticeably greater than the 0.9 percent increase that economists had predicted.

The cost for foreign oil rose by 12.2 percent to an all-time high of $17.16 billion in August, up from $15.3 billion in July. The average per barrel price of imported crude oil also set a record at $52.65 in August with further increases forecast given the surge in oil prices since August.

Analysts predicted further bad news on the trade deficit in the months ahead, reflecting the surge in energy costs that occurred after Katrina and Rita shut down refineries and oil and natural gas platforms along the Gulf Coast. Crude oil prices briefly spiked above $70 per barrel right after Katrina hit.

Underscoring that point, the Labor Department said that the gain in the prices of imported goods was driven by a 7.3 percent surge in petroleum prices.

The August trade deficit of $59.03 billion was up from a revised imbalance of $57.96 billion in July.

U.S. exports in August rose by 1.7 percent to a record level of $108.18 billion. Imports were also at a record, rising by 1.8 percent to $167.21 billion.

America's deficit with China increased to $18.47 billion in August, up 4.6 percent from the July level. The deficit with Japan narrowed slightly to $6.59 billion in August, compared to $6.63 billion in July.

The U.S. trade deficit with Japan fell to $6.59 billion from $6.63 billion in July while the deficit with the 25-nation European Union increased to $11.29 billion and the deficit with Canada widened to $6.65 billion.

In other news, the government reported that the number of people who have lost their jobs because of Hurricanes Katrina and Rita jumped to 438,000 last week, helping push the number of first-time jobless claims nationwide for the week to 389,000. The Labor Department reported that an additional 75,000 hurricane-related claims were filed last week out of the nationwide total.

Government analysts said that Katrina, which hit near New Orleans on Aug. 29, was still accounting for more layoffs than Rita, which came ashore near the Texas-Louisiana border on Sept. 24.

The rise of 75,000 in hurricane-related unemployment benefit claims was up slightly from 74,000 such claims two weeks ago, the first week that claims from Rita showed up. The highest week for claims attributed to the hurricanes was the week ending Sept. 17, when claims from Katrina totaled 108,000.

Analysts said it is likely that hurricane-related claims have peaked but they said it was likely that they will remain a significant portion of total jobless claims for several more weeks, reflecting the widespread destruction which wiped out thousands of businesses along the Gulf Coast.

The government reported last Friday that the nation's jobless rate was pushed to 5.1 percent in September from a four-year low of 4.9 percent in August.

The monthly employment report also showed that business payrolls fell by 35,000 in September. It was the first monthly decline in two years, a falloff that was blamed on Katrina. In August, the economy had created 211,000 new payroll jobs.

The 389,000 new claims for jobless benefits that were filed last week represented a drop of 2,000 from the 391,000 claims filed two weeks ago. Analysts have been encouraged that the level of jobless claims in the rest of the country has remained steady, indicating that the overall economy has been able to weather so far the shocks from the hurricane and the resulting surge in energy prices as Gulf Coast production facilities were shut down.

The weekly jobless claims report showed that the biggest increase for the week ending Oct. 1 occurred in Texas, a rise of 17,931 that was attributed to the hurricanes. The layoffs occurred in construction, public administration and manufacturing.

Louisiana had the second largest increase in layoffs, a total of 8,580, a rise that was also attributed to the hurricanes. The breakdown for individual states lags behind the national data by one week.

Source: Associated Press/AP Online

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