The US trade deficit widened unexpectedly in November to a record $60.3 billion, propelled by the highest-ever oil import bill and a drop in exports, a government report showed on Wednesday. The surprising surge in the trade gap sent the dollar tumbling in early trading against both the euro and the yen and analysts said the shortfall will likely eat into expectations for the economy's growth in the fourth quarter of 2004.
The widening of the deficit - which topped $60 billion for the first time - defied Wall Street forecasts for it to narrow to $54 billion. October's deficit was revised up to a $56.0 billion gap from the originally reported $55.5 billion.
"The dollar's fall has been sudden, violent and appropriate given this number. Recent exchange rate movements certainly haven't had any impact yet" on the wide US trade deficit, said John Beerling, regional foreign exchange trading desk manager at Wells Fargo.
Long-term US Treasury prices also weakened on concerns the deficit implied slower-than-expected fourth quarter growth, though shorter-term treasury prices edged higher.
The deficit has continued to balloon despite a 50 percent drop in the value of the dollar against the euro over the past three years, which has been expected to gradually narrow the gap.
"It's a disappointment. We were anticipating that the decline in oil prices from their peak in October might help narrow the trade deficit, but the average price of crude oil remained high over that period and imports remained strong, so it really didn't play a factor in this month's number," said Gary Thayer, chief economist at A.G. Edwards & Sons.
The trade shortfall for the first 11 months of 2004 was $561.3 billion, well past the record of $496.5 billion set for all of 2003.
Although average oil import prices retreated slightly in November, they remained high enough to push the value of crude oil imports to record $13.4 billion.
Meanwhile, imports from China fell only fractionally to $19.6 billion from the record $19.7 billion set in October. The trade imbalance with China accounts for about 25 percent of the overall US trade deficit.
Rising US consumer demand for household goods and other products helped boost overall imports by 1.3 percent to a record $155.8 billion. Strong demand for advanced technology products widened the deficit in that category to a record $5.8 billion.
US exports slipped 2.3 percent to $95.6 billion, as shipments of US industrial supplies and materials - including things such as plastic and chemicals - fell in the face of weaker foreign demand. US auto and auto part exports also edged lower.
Even though the drop in the value of the dollar makes US exports more competitive, demand from major US trading partners remains weak and the Federal Reserve has cautioned against expecting any significant improvement in the near term.
While the US trade deficit with China improved slightly from the record set in October, the bilateral gap with Japan was the highest since October 2000 and deficits with Canada, Russia and South Korea set records in November.
In a separate report, an industry group said applications for US home mortgages dropped last week as a decrease in purchasing activity offset an increase in refinancing activity.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity declined 3.0 percent to 587.8 in the week ended January 7, after falling 10.6 percent in the MBA's prior week survey.
The MBA's purchase index, a gauge of loan requests for home purchases, decreased 5.8 percent last week to 393.1, adding to the 13.7 percent loss the previous week.
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