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. Last Updated: 07/27/2016

Oil Bill Helps U.S. Deficit to $80.7Bln Record

WASHINGTON -- The U.S. trade deficit soared to a record $80.7 billion in the spring as a small increase in American export sales abroad was swamped by a huge rise in imports, including a big increase in the nation's foreign oil bill.

The U.S. Commerce Department reported Tuesday that the deficit in the nation's current account climbed 17.5 percent in the April-June quarter, above the first-quarter imbalance of $68.7 billion, which had also been a record.

The current account is the broadest measure of trade because it includes not only goods and services, which are tracked in monthly government reports, but also investment flows and a category that includes U.S. foreign-aid payments.

Through the first half of this year, the current account was running at an annual rate of $299 billion, far surpassing the imbalance for all of 1998 of $220.6 billion, the biggest deficit in history.

America's widening trade deficit reflects the impact of the Asian financial crisis, which cut sharply into U.S. export sales of farm products and manufactured goods and also increased competition from cheaper-priced imports.

The U.S. economy, however, has been able to withstand the poor trade performance because of the strength of the consumer sector.

In another report Tuesday, the government said retail sales last month jumped by 1.2 percent in August, the biggest increase in six months.

The August advance was powered by strong sales of autos, furniture and clothing and followed a 1 percent July increase, which represented an upward revision from an originally reported 0.7 percent advance.

The new figures showed consumer spending, which accounts for two-thirds of the total economy, remains at high levels. That is likely to raise concerns that the Federal Reserve will have to do more in terms of boosting interest rates to slow economic growth to a more sustainable pace.

Interest rates rose in the inflation-sensitive government bond market after the retail sales figures came out and stock prices fell. The big rise in the current-account deficit in the second quarter was led by a 14 percent increase in the deficit in goods, which climbed to $84.6 billion in the spring.

U.S. goods exports increased 0.9 percent, with manufactured goods and farm exports both showing increases. However, this small improvement was swamped by a 4.9 percent rise in imports led by a sharp increase in world petroleum prices.

The United States still had a surplus in services, covering such things as airline fares and insurance sales, but it declined to $19.6 billion in the second quarter, down from $20.2 billion in the first quarter. The deficit in investment earnings edged up to $4.4 billion in the second quarter, from $4.3 billion in the first three months of the year, while a category that includes U.S. foreign aid rose to a deficit of $11.3 billion in the second quarter, up from $10.3 billion.

Economists have been looking for consumer spending to slow, based on the fact that the Fed has already boosted short-term interest rates by one-half percentage point this summer and long-term rates, including mortgage rates, have risen even more this year.

But the consumer sector is being supported by the lowest unemployment rate in nearly 30 years, a 4.2 percent level that gives more workers cash to spend.

The 1.2 percent jump in retail sales last month was the biggest one-month advance since a 1.7 percent surge in February.