The US trade deficit swelled to a record $66.1 billion in September, after Hurricane Katrina pushed oil prices to record highs and exports fell to cause the largest monthly increase in the deficit in over a year.
But in early November, lower gasoline prices and an improving jobs market helped US consumers overcome some of their gloom after the hurricanes that hit the US Gulf Coast in late August and September.
The Commerce Department's report on the international trade balance showed September's trade gap beat the previous record of $60.4 billion set in February and outstripped economists' forecasts of $61.0 billion.
The deficit widened 11.4 percent from August, the largest monthly jump since June 2004.
Economists said the surprisingly large increase could act as a temporary drag on overall economic growth.
"We knew that there were going to be some hurricane-related distortions in the September data. But this really exceeded our worst fears. This was a turn for the worst," said Michael Woolfolk, senior currency strategist for Bank of New York.
The politically sensitive trade deficit with China hit a record $20.1 billion in September, as imports from that country rose to a record $23.3 billion.
In the United States, politicians and business lobby groups have been accusing China of gaining a trade advantage by keeping its currency artificially weak, making its products cheaper abroad.
China earlier reported a record trade surplus of $12 billion in October but affirmed its policy of keeping the yuan steady, despite Washington's calls for more currency flexibility to help cut the US' deficit with China.
Washington and Beijing reached a deal this week to rein in China's surging clothing and textile exports to the United States through 2008.
The Commerce Department also said oil import prices averaged a record $57.32 per barrel in September, helping push the trade deficit with Opec countries to a record $9.1 billion. The quantity of US crude oil imports fell to the lowest level since February 2003.
US crude oil prices hit a record $70.85 per barrel following Katrina, which slammed into the US Gulf Coast on August 29, shuttering much of the region's oil-producing and refining capacity.
CHEAPER GAS CHEERS CONSUMERS However, gasoline prices have since fallen from the highs seen in September and by early November, the drop was big enough to brighten the mood among US consumers.
The University of Michigan said its preliminary index of November consumer sentiment rose to 79.9 from 74.2 at the end of October, according to sources who saw the subscribers-only report. Wall Street economists had forecast a rise to 76.0.
"The upturn in confidence is an encouraging sign that economic conditions are stabilising after the hurricanes. Lower energy prices are helping, but the upturn in employment is also a plus," said Gary Thayer, chief economist at A.G. Edwards and Sons in St. Louis.
Consumers' perception of current conditions improved, as this component of the index rose to 100.3 from 91.2 in October, while the expectations component rose to 66.8 from 63.2.
Confidence gauges are often used as an indicator of future consumer spending patterns, even though low interest rates over the past few years have caused this link to weaken.
Another report showed overall US import prices unexpectedly fell 0.3 percent in October, their first decline since May, as petroleum costs eased, which could relieve some pressure on the Federal Reserve to keep raising rates.
Wall Street economists had expected import prices to be flat in October after September's 2.3 percent rise, which was the largest monthly advance in almost 15 years.
Despite the disruption to US exports and US Gulf Coast ports caused by Hurricane Katrina, and later Hurricane Rita, overall imports jumped 2.4 percent in September to a record $171.3 billion, led by the record value of petroleum imports.
US exports tumbled 2.6 percent to $105.2 billion, the biggest setback since the September 2001 attacks on the United States. Exports through the US Gulf region fell more than 16 percent from August, while imports fell nearly 9 percent.
Data from the Labour Department showed new claims for US unemployment benefits rose by 2,000 to a seasonally adjusted 326,000 in the week ended November 5 on a burst of jobless applications related to Hurricane Wilma.
Wall Street economists had expected 320,000 initial claims after a revised 324,000 the prior week.
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