The U.S. trade deficit suffered a major setback in June, swelling to $12.5 billion, the government said Tuesday. The deterioration followed three straight months of improvements.
The growth in the trade balance - 28.5 percent worse than the May imbalance of $9.8 billion - was likely to jolt financial markets.June's trading shortfall was the worst since February's $14.4 billion deficit, which triggered a 100-point plunge in the Dow Jones industrial average when it was announced in April.
The June deficit, as reported by the Commerce Department, was substantially worse than had been expected. Most economists had anticipated a deficit of around $10.9 billion as analysts expected that a rise in imports would be partially offset by continued growth of exports.
However, exports fell by 2.4 percent in June to a seasonally adjusted $26.8 billion while imports surged to an all-time high of $39.4 billion.
The deterioration pointed up the problem facing U.S. policy-makers, who have struggled for most of this decade to find ways to reduce soaring trade deficits.
While U.S. exports have shown improvements because of a substantial decline in the value of the dollar, imports have stayed at stubbornly high levels despite the fact that a weaker dollar is now making foreign goods more expensive for American consumers.
The 5.7 percent jump in imports in June was laid to a sharp rise in imports of clothing, office equipment and heavy machinery.
The report said that shipments of foreign capital goods shot up by $900 million in June while shipments of consumer goods rose up $700 million.
The weakness in exports reflected declines in shipments of American capital goods, agricultural products and autos.
Even with the deterioration, the U.S. trade deficit for the first six months of the year was running at an annual rate of $140 billion, down sharply from the record deficit of $170.3 billion set in 1987.
America's foreign oil bill declined slightly in June to $3.6 billion, compared to $3.9 billion in May, as the average price per barrel fell to $16.19, down 21 cents from May. An average of 7.36 million barrels of oil were imported daily, down from 7.76 million barrels daily in May.
As usual, the largest overall deficit was with Japan, an imbalance of $4.4 billion, up from $4.1 billion in May.
The deficit with Canada, America's largest trading partner, climbed to $1.40 billion.
The deficit with the countries of Western Europe rose to $1.9 billion while the deficit with the newly industrialized countries of Taiwan, South Korea, Hong Kong and Singapore rose to $2.7 billion in June.