Oil widens US trade imbalances

http://news.bbc.co.uk/go/rss/-/1/hi/business/6757953.stm

Version 0 of 1.

The US trade deficit widened in the first three months of 2007, following higher oil prices, data from the US Commerce Department showed.

The US balance of payments deficit - the broadest indicator of trade - hit $192.6bn (£97bn), from a revised $187.9bn in the last quarter of 2006.

The rise however was less than analysts had forecast and many predict it to narrow over time as exports increase.

The US has seen its trade deficit at record highs for five years in a row.

'Robust'

US goods exports increased to $270.1bn from $266.5bn, as imports rose to $471bn from $466.8bn.

Capital payments to foreigners increased considerably from $20.7bn from $26.1bn due in part to money paid to the Middle East and private remittances.

"Although the current-account deficit did edge higher in the first quarter, we continue to believe that the deficit peaked back in the third quarter of 2006," said Nigel Gault, an economist at Global Insight.

"Robust export growth, and some cooling in import growth, should keep the deficit down this year," he added.

But other analysts pointed to underlying trends which would need to be reversed.

Peter Morici, an economist at the University of Maryland said the trade deficit was caused by an overvalued dollar against the Chinese yuan as well as an inadequate energy policy making the US overly dependent on foreign oil.