Trade gap widens on oil imports

The US trade deficit widened in May as higher oil prices pushed imports to an all-time high, swamping a rise in exports, a government report just published showed.

A separate report showed Americans applying for first-time jobless benefits fell more than expected in the latest week, suggesting continued labour market strength.

The May trade shortfall totalled $60 billion, matching the median estimate of Wall Street analysts surveyed before the report. It widened 2.3 per cent from a revised April deficit of $58.7 billion, the US Commerce Department reported.

US imports rose 2.3 per cent to $192.1 billion, the result of an oil import bill that swelled to $19 billion, its highest level since September.

Average prices for crude oil imports rose more than $2 a barrel in May to $59.36, an eight-month high, and imports from the Organisation of Petroleum Exporting Countries jumped almost 10 per cent to a record $14.6 billion. "This is not a good month but it's not the worst month of the year either. We are still on track for improvement in the trade gap this year," said Kurt Karl, chief economist, Swiss Re, New York.

Exports did continue to provide a silver lining, with overall goods and services exports rising 2.2 per cent, led by a $1.9 billion rise in civilian aircraft shipments and record exports of consumer goods. A weaker US dollar and robust growth abroad have supported US exports of late, and that has helped to narrow the US trade gap on an annual basis and boost domestic growth.

In the first five months of the year, the deficit stood at $295.5 billion, below $317.8 billion in the same period last year. In 2006, the trade gap hit a record $758.5 billion.

The Labour Department said the number of US workers applying for jobless benefits fell 12,000 to a seasonally adjusted 308,000 last week from an upwardly revised 320,000 the prior week.