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August 11, 2010    

US trade deficit widens in June

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by Kay Murchie
’US

The Commerce Department today announced the US trade deficit widened in June to $49.90 billion (£31.8 billion) – the highest level in 20 months and much higher than the $42.2 billion most economists had expected.

According to the Commerce Department, the further widening in the trade deficit was primarily due to rising imports from China and falling exports.

The figures showed that imports grew 3% to $200.3 billion, while exports fell 1.3% to $150.5 billion.

In the meantime, the trade deficit with China grew to $26.15 billion in June, the widest level since October 2008 and represented a 17% rise on May’s deficit.

According to Moody’s Economy.com’s economist, Christopher Cornell, it is “bad news for real GDP growth in the US, which will be further reduced by the effects of rising imports../../../../2010/08/11/us-trade-deficit-widens-in-june/.__8221.css;

In related news, the Federal Reserve yesterday elected to keep US interest rates at the historically low level of between 0% and 0.25%, as widely expected.

Interest rates in the world’s largest economy have been at the low level since December 2008 and the bank has previously said that as a result of subdued inflation and high unemployment, low interest rates are required for “an extended period”.

However, the US central bank has taken action to boost the struggling economy by reviving the “quantitative easing” (QE) scheme – a method introduced by the Bank of England to stimulate growth within the economy.

The option it has taken has been dubbed “QE lite” by some economists.

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