Updated from 9:42 a.m. EDT
Riding the tail of surging oil prices, American imports continued to far exceed exports in July.
The trade deficit, a broad measure of the nation's international trade habits, reached $31.89 billion in July, an increase from the revised $29.85 billion in June, the
said Wednesday. Previously, the government estimated June's trade gap at $30.62 billion.
July's figure exceeded the consensus among a group of economists polled by
, who expected the trade deficit to hit $30.82 billion.
Still, some economists seemed unfazed by the trade deficit's latest surge. "Even with yet another record, it's hard to get terribly excited or worried about the deficit right now," said Bill Cheney, chief economist at
John Hancock Financial Services
. "The fact is, short term, the deficit isn't hurting us."
Exports fell by 1.5% to $89.7 billion in July, $1.3 billion less than June. Imports rose 0.6% to $121.6 billion in July, $700 million more than June. The rise in imports reflects strong consumer demand, and that could pique the interest of
policymakers, who are on the lookout for signs of inflation.
The Fed has raised interest rates six times over the last 15 months, in an effort to stem the threat of inflation. Recent economic figures suggest that the interest rate increases have succeeded in cooling the economy.
The rise in imports in July reflected increases in the value of crude oil and natural gas and automobiles and parts. The decline in exports was in part a result of a decrease in sales of automotive parts and industrial supplies overseas.
The U.S. trade deficit with China -- the largest single country gap -- widened to $7.6 billion in July, compared with $7.2 billion in June. The U.S. gap with Japan grew significantly, to $7.5 billion in July from $6.3 billion in June, while the deficit with Western Europe ballooned to $7.2 billion from $4.3 billion in June.
The U.S. trade deficit surged after the foreign financial crises of 1997 and 1998 that originated in Southeast Asia. Demand for U.S. exports fell, while, at the same time, the U.S. market was seen as a haven for Asian countries to export themselves out of crisis.
The U.S. has so far not seen the value of the dollar fall with the high trade deficits, as economic theory would predict. The dollar is the reserve currency of choice for many foreign governments, and the U.S. capital markets have attracted legions of foreign investors, keeping demand for dollars strong.
Indeed, even though conventional U.S. manufacturers -- "smokestack companies" in Internet economy parlance -- are having trouble exporting, America's information economy continues to be an attractive investment for foreigners. This underpins the strength of the dollar, said Fred Breiymer, chief economist at
State Street Advisors
"The eagerness to invest in the U.S.'s new economy has resulted in some support for the dollar," Breiymer said.
Much of the trends underlying the trade deficit data have been known for weeks. For example, July figures for factory orders and durable goods orders released in late August both showed record declines, giving economists some indication of the direction of the trade deficit.
"My expectation was that we'd have some serious problems in July," Breiymer said. The fall in shipments and orders led him to lower his expectations for third-quarter growth in the
gross domestic product to around 2.5% from 3%, he said.
While merchandise exports fell 2.2% in July, there are some hints of a rebound.
has reported sharply higher aircraft shipments in August. Meanwhile, automobile production rebounded in August, leading economists to expect higher motor vehicle exports to Canada and Mexico, noted Stan Shipley, senior economist at