BEIJING, Jan. 14 -- The US trade deficit unexpectedly grew to US$60.3 billion in November, the widest ever, as demand for oil and consumer goods pushed imports to a record. Exports fell.

    The trade gap increased 7.7 per cent from the previous high of US$56 billion in October, the Commerce Department said yesterday in Washington. The imbalance with China accounted for more than a quarter of the total deficit.

    "We need to get more growth in the global economy," Treasury Secretary John Snow said in an interview, calling the deficit a sign of US economic strength. "As our trade partners grow faster, that will be good for our exports."

    The unprecedented US budget and trade shortfalls threaten a further erosion in the dollar, which fell 4.6 per cent last year against a basket of currencies.

    To keep financing these shortfalls, foreign investors may demand higher interest rates for US assets that they buy. A cheaper dollar also threatens to aggravate inflation by making imports more expensive.

    November's trade gap may shave as much as 1 percentage point from fourth-quarter growth forecasts, said economists including Stephen Stanley of RBS Greenwich Capital Inc in Connecticut and Ian Morris of HSBC Securities USA Inc in New York.

    Others, including Joseph LaVorgna at Deutsche Bank Securities Inc in New York, said any negative effects from trade may be overcome by increased spending.

    Fed policymakers are likely to use the numbers to continue raising the benchmark interest rate because of what the report shows about demand in the United States, economists said.

    "From an economic perspective, the rapid widening of the trade gap is a sign that monetary policy remains far too accommodative," said John Ryding, chief US economist at Bear Stearns & Co in New York. The policy making Federal Open Market Committee "might worry" about the impact on inflation.

    "Unavoidable economic logic suggests that eventually this situation will prove unsustainable," Cathy Minehan, president of the Federal Reserve Bank of Boston, said in a speech yesterday, citing the trade gap and the drain on national savings from the federal budget deficit.

    The budget deficit narrowed in December to US$3.4 billion from US$17.6 billion a year earlier, the Treasury Department said yesterday.

    A forecast in September from the Congressional Budget Office called for the gap to shrink to US$348 billion this fiscal year, which ends September 30, from a record US$412.3 billion in 2004.

    Fed officials said at their December 14 meeting that strengthening demand among US trading partners was "unlikely," according to minutes published last week.

    The US economy grew 4 per cent in the third quarter from a year earlier, compared with 1.8 per cent in the countries using the euro and 2.6 per cent in Japan.

    The US$561.3 billion excess of imports over exports through November exceeds the record US$496.5 billion for all of 2003.

    "We now have the Grand Canyon of trade deficits, and there is no saying it will not widen further," Joel Naroff, president of Naroff Economic Advisors Inc in Holland, Pennsylvania, said. "The ever widening trade chasm has to put further pressure on the dollar."

    Economists expected the deficit to narrow to US$54 billion for the month compared with a previously reported US$55.5 billion in October, according to the median estimate of 70 forecasts in a Bloomberg News survey. The yield on the benchmark 10-year US Treasury note was unchanged at 4.24 per cent at 5:32 pm yesterday.

    A cheaper dollar is supposed to strengthen exports by making US goods cheaper, and exports had climbed to a record in October. The subsequent drop caught economists by surprise.

    "The November plunge makes no sense," Ian Shepherdson, chief US economist at High Frequency Economics Ltd in Valhalla, New York, said. He noted that exports in the first 11 months of the year were up more than 12 per cent.

    The euro traded at US$1.3262 as of 6:18 pm yesterday in New York, from US$1.3107 on Wednesday. The yen traded at 102.43 per dollar, compared with 103.32.

    The deficit with the 15-country European Union widened. The gap with Japan was the largest since October 2000.

    (Source: China Daily by Joe Richter)