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Posted by Daniel Workman Oct 16, 2006 |
Washington Bureau Chief Peter Morton for the Financial Post reports that the U.S. deficit was 3 billion higher than economists had forecasted.
Crude oil prices had reached a high of $77.03 in July and since have fallen to around $58 in the first week of October. America is a net importer of oil so higher prices in July and August significantly increased what the U.S. paid for imports during those months.
Lower oil prices in October will not show up in American trade statistics until later in the year.
Meanwhile the American trade deficit with China swelled almost 13% to a record $22 billion in August. The U.S. deficit is up some 14% last year when it hit $202 billion - the highest deficit recorded with a single trading partner. A major roadblock remains the Chinese yen, which the U.S. says is undervalued which makes Chinese products cheaper to import into the U.S. and conversely causes American-dollar exports more expensive in China.
China's foreign exchange reserves are fast approaching a mind-boggling $1 trillion propelled by China's booming trade surplus.
Some economists say the bright side to the U.S. deficit is that increased imports show that consumers are still spending. Most pragmatic economists warn that the balooning deficit will eventually provide a strong drag slowing down the world's largest economy.
Canada's trade surplus increased 9.1% to $4.2 billion in August, in part due to a rise of 19% in wheat exports. Demand for Canadian wheat soared as a drought in Australia led to a 44% decrease in wheat supplied from that country.