The nation's trade deficit ballooned again in June, according to new data, which only raises the chances of another interest rate hike by the Federal Reserve and ultimately a slowdown in economic growth, economists said.
The deficit soared to a record $24.6 billion in June, from $21.2 billion in May. Imports hit a new high of $103 billion, compared with $99.1 billion the previous month, and exports edged up to $78.4 billion, from $78 billion in May.
Fed Chairman Alan Greenspan has several times warned that the trade gap cannot continue to grow at the current rate without consequences. Fed officials are likely to view the figures as bolstering the case that domestic demand must be cooled.
The latest report from the Census Bureau prompted a slide in the international value of the dollar, a development that may be viewed as inflationary at the Fed, where policymakers will meet Tuesday to mull recent business trends and possibly raise rates.
Meanwhile, the effect of the gap is to cut into economic performance at home and the second-quarter growth figures for gross domestic product are likely to be revised downward.
"The drag on U.S. growth from deteriorating trade is intense," said Gerald D. Cohen, senior economist at Merrill Lynch & Co. "June's deficit is much larger than was originally assumed in the second-quarter GDP report. We believe that real net exports now cut around 1.5% from second-quarter growth."
That could mean gross domestic product growth in the previous quarter will be revised to just below 2% from an originally reported 2.3%, he said. The government issues three estimates of gross domestic product growth for each quarter, revising them as fresh data are received.
The deficit reflected surges in imports versus exports with all of the nation's major trading partners. In Asia, the deficit with Japan jumped to $6.3 billion in June, from $5.3 billion in May, and the gap with China increased to $5.7 billion, from $5.3 billion.
-- Gordon Matthews
