Foreign Trade Deficit Hits New Record

The U.S. current account deficit widened to a new record in the second quarter as imports outpaced exports, but import price rises remained muted despite the rising cost of oil, the government said Wednesday.

The Commerce Department said the current account deficit, the nation’s broadest measure of foreign trade, swelled 4.6% to $106.14 billion in the second quarter, surpassing the record set in the previous quarter of $101.51 billion.

Although the deficit hit fresh records, it was not as large as the $131.3-billion gap forecast by economists in a Reuters poll. The deficit now stands at more than 4% of gross domestic product--a level economists view as potentially dangerous, if not of immediate concern.

The Labor Department, in a separate report, said import prices rose a weaker-than-expected 0.2% in August after being unchanged in July. Economists had expected a 0.5% gain.

Import prices have risen 5.8% in the last year, but much of that increase has been in petroleum-related goods. Excluding petroleum, import prices rose just 0.1% in August.

The widening second-quarter deficit was driven primarily by an increase in the deficit for goods, which hit a new record at $110.22 billion.

The current account measures not only goods and services with other nations but also investment flows and government grants, making it the widest measure of the nation’s trade performance.

The robust U.S. economy has been pulling in imported goods at a much faster pace than reviving economies in Asia and elsewhere have been buying U.S.-made products, leading to fears that the United States may begin to import inflation.

To date, those concerns have yet to be realized even as the deficit has swelled to $106.14 billion compared with a gap of $78.98 billion during last year’s second quarter.

Although the inflation-wary Federal Reserve is concerned that the trend toward ever-larger deficits is unsustainable, the muted price gains from overseas producers should offer it some solace ahead of its Oct. 3 meeting on interest rates.