In Deeper U.S. Trade Deficit, Good News for World's Economy

The U.S. trade deficit hit its highest level in six months in July as a record rise in imports outpaced a third straight increase in foreign demand for American products, according to government data released Thursday. Both gains provided more evidence that the worst recession since the 1930s is losing its grip on the global economy.

The Commerce Department said the trade deficit rose 16.3 percent, to $32 billion, in July, much larger than the $27.4 billion imbalance that economists had expected. It was the largest imbalance since January, and the percentage increase was the biggest in more than a decade.

Imports rose 4.7 percent, to a total of $159.6 billion, the largest monthly advance on records that date to 1992 and the second consecutive gain after 10 straight declines. The rebound reflected a 21.5 percent spike in imports of autos and auto parts, partly because of increased production at U.S. auto plants owned by General Motors and Chrysler that had been slowed when the companies were struggling to emerge from bankruptcy protection.

Exports edged up 2.2 percent, to $127.6 billion. That was a third straight monthly increase, but it left exports well below their record level of $164.4 billion, set in July 2008.

The export gains reflected big increases in shipments of civilian aircraft, computers, industrial machinery and medical equipment.

American companies have been hampered by a drop in demand at home and in major export markets as the recession that began in the U.S. spread worldwide. But economists are hoping that a rebound in global economies as well as further weakening in the value of the dollar will help boost exports in coming months. A weaker dollar makes U.S. products less expensive overseas.

"While wider trade deficits are normally not good news, in this case, the rise in demand for foreign consumer and business goods tells us the U.S. economy is healing," Joel Naroff, president of Naroff Economic Advisors, wrote in a note to clients. "This was a positive report in that it provides further evidence that both the U.S. and foreign economies are coming back." So far this year, the deficit is running at an annual rate of $355.5 billion, about half of last year's total. Economists think the deficit will keep rising in the months ahead, reflecting stronger growth in the U.S. and rising oil prices.

On the jobs front, the Labor Department said Thursday that initial claims for unemployment insurance fell to a seasonally adjusted 550,000, from an upwardly revised 576,000 the previous week. Analysts had expected claims to drop to 560,000, according to Thomson Reuters.

The number of people continuing to receive benefits fell by 159,000, to nearly 6.1 million, the lowest level since early April.

Still, unemployment claims remain significantly above levels associated with a healthy economy and indicate that jobs remain scarce. Weekly initial claims are generally at 325,000 or below in a growing economy. A year ago, only 3.5 million people were receiving unemployment aid.