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U.S. trade gap grows as imports rise

Deficit hits $60 billion in May, up 2.3% from April. Other data show a foreclosure surge and a drop in jobless claims.

July 13, 2007|From Times Wire Reports

WASHINGTON — America's trade deficit rose to its second-highest level of the year as the price of imported crude oil jumped and demand for Chinese products remained strong despite recalls of tainted products.

A separate weekly report showed the number of Americans applying for first-time jobless benefits fell more than expected, suggesting continued labor market strength.

Mortgage foreclosures in the U.S. jumped to a record in the first half of the year as rising interest rates and falling home prices battered homeowners.

The Commerce Department reported that the deficit for May rose to $60.04 billion, 2.3% more than in April. Most of the deterioration in the trade balance reflected a big increase in the foreign oil bill, which swamped record sales of U.S. products abroad.

The Bush administration said the continued rise in exports validated President Bush's campaign for free-trade deals and his opposition to raising import barriers.

The trade deficit this year is running at an annual rate of $709 billion. That is down 6.5% from last year's $758.5 billion, the fifth consecutive year that the deficit was a record.

Analysts expect the deficit to improve this year. U.S. exports are benefiting from strong growth abroad. Also, the falling value of the dollar against the euro and other currencies lifts exports.

For May, exports of goods and services rose 2.2% to an all-time high of $132 billion.

That figure reflected big gains in sales of U.S.-made aircraft, electronics and oil drilling equipment.

Imports also set a record, rising 2.2% to $192.1 billion. That included a 6.2% jump in petroleum products to $26.6 billion, the highest since last August.

Also Thursday, the Labor Department said the number of U.S. workers applying for unemployment benefits fell 12,000 last week to a seasonally adjusted 308,000, a level that suggests the job market remains solid.

"The economy is growing, and it is growing modestly," said Robert Lutts, president and chief investment officer at Cabot Money Management Inc. in Salem, Mass. "We had a good month or so."

But foreclosures soared. Almost 926,000 foreclosure notices were filed through June, 56% more than a year earlier and the most since Irvine-based RealtyTrac started tracking the data in 2005.

Foreclosures were the highest last month in California and Florida, where some home prices have fallen as much as 25%, and in Ohio and Michigan, where the automotive industry has fired more than 50,000 people in the last 10 years.

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Bloomberg News, Reuters and the Associated Press were used in compiling this report.

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