US spends, the world benefits

The USA trade gap increased to a record $68 billion in July the Commerce Department revealed. The number was higher than expectations as American consumers continue with their love affair of the worlds products, despite things getting tighter at home.

Much of the increase, about a third, has been attributed to oil prices, though oil is now 15 percent off its peak price.

Democrats said the worse-than-expected showing was evidence President Bush’s trade policies were failing to protect American workers from unfair foreign competition they said had contributed to the loss of nearly 3 million manufacturing jobs since Bush took office.

The gap between the USA and China fell slightly to $19.6 billion, but the overall gap is still likely to exceed $202 billion from last year. The Chinese government has come under intense pressure from the US to raise the value of the its currency so that the gap can close.

The worsening trade gap will put pressure on growth this quarter and this in turn will put more pressure on the stock market indices.