Oil imports blamed for surge in deficit

WASHINGTON - The U.S. trade deficit surged to a larger-than-expected $40.18 billion in December, the biggest imbalance in 12 months. The wider deficit reflected a rebounding economy that is pushing up demand for oil and other imports.

The Commerce Department said the December deficit was 10.4 percent higher than the November imbalance. It was much larger than the $36-billion deficit economists had expected, with much of the increase coming from a big jump in oil imports.

For December, exports of goods and services rose for an eighth consecutive month, climbing 3.3 percent to $142.70 billion. The increase was led by strong gains in sales of commercial aircraft, industrial machinery and U.S.-made autos and auto parts.

Imports were up 4.8 percent in December to $182.88 billion, led by a 14.8 percent surge in oil imports, which rose to the highest level since October 2008.

For all of 2009, the deficit totaled $380.66 billion, the smallest imbalance in eight years, as a deep recession cut into imports. However, economists believe the deficit will rise in 2010 as U.S. demand for imports outpaces U.S. export sales.

"Trade may support the U.S. recovery going forward but only marginally now that domestic demand is once again pulling in imports," Sal Guatieri, senior economist at BMO Capital Markets, said in a research note.

By country, the deficit with China totaled $226.83 billion in 2009, still the largest imbalance with any nation but down 15.4 percent from the record of $268.04 billion set in 2008. The deficit with Canada dropped by 74.2 percent in 2009 to $20.21 billion, while the European Union deficit fell by 36.8 percent to $60.54 billion.

The deficit hit a nine-year low of $25.81 billion in May and is expected to keep rising in 2010 even though U.S. manufacturers will be benefiting from stronger overseas sales as the global economy rebounds and a weaker dollar makes their products more competitive in foreign markets.