updated 12/11/2008 2:49:19 PM ET 2008-12-11T19:49:19

America’s trade deficit rose unexpectedly in October as the global recession dampened sales of U.S. products in foreign markets and the volume of oil imports surged.

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Analysts, however, saw the increase as a momentary blip in a trend dominated by recession that should lower the deficit significantly in the coming year.

The trade deficit rose to $57.2 billion in October from $56.6 billion in September, the Commerce Department reported Thursday.

Analysts had expected the deficit to decline to $53.5 billion on lower oil prices. But a record spike in the volume of oil imports surprised economists and overwhelmed a record drop in crude oil prices.

So far this year, the U.S. trade deficit is running at an annual rate of $709.1 billion, up slightly from last year’s imbalance of $700.3 billion. Last year’s decline in the deficit came after the trade imbalance had set record highs for five straight years.

Analysts said the deficit is likely to decline significantly in 2009, reflecting a severe recession in this country that will cut into consumer demand for foreign goods. Continued weakness in oil prices, which have fallen by about $100 per barrel since hitting a record at $147 in July, also should help bring down the trade imbalance.

David Wyss, chief economist at Moody’s Economy.com, said the deficit in the current account, the broadest measure of trade, could be cut in half next year as long as oil prices do not rise unexpectedly.

Besides oil, another big wild card is how severe the recession gets in America’s major overseas markets. Europe and Japan are going through major slowdowns that will cut into sales of U.S. exports, which had been the American economy’s standout performer for over a year.

For October, exports of goods and services dropped by 2.2 percent to $151.7 billion. It marked the third consecutive month that exports had declined. After hitting an all-time high in July, exports have now fallen to the lowest level since then.

The October decline reflected weaker sales for American farm products such as corn, wheat and meat, and widespread declines in manufactured goods including aircraft, semiconductors and heavy machinery.

Economists said the big drop in commercial aircraft partly reflected the lingering effects of a strike at Boeing Co. and should not be repeated in coming months.

Imports fell by 1.3 percent in October to $208.9 billion, led by a $921 million decline in imports of autos and auto parts as foreign car companies are being hit by the same downturn that has sent Ford Motor Co., General Motors Corp. and Chrysler LLC to Congress in search of bailout support.

While the average price for crude oil fell by a record amount, the total oil bill rose by 3 percent to $37.7 billion on the spike in the volume of imports.

The politically sensitive deficit with China jumped to a record $28 billion in October as imports of toys, computers and televisions surged. However, with the U.S. and much of the rest of the world now in a recession, China’s export-led growth is beginning to falter, raising fears that rising job layoffs at Chinese factories could trigger political unrest among displaced workers in the world’s fourth largest economy.

President-elect Barack Obama was highly critical of the Bush administration’s trade policies during his campaign, pledging to be tougher in enforcing protections for American workers. That stance could mean more unfair trade cases brought against China, something that organized labor and other groups have been pushing for.

“The trade deficit with China is not a product of market forces,” said Scott Paul, the executive director of the Alliance for American Manufacturing, a partnership of manufacturing companies and the United Steelworkers. “It is the result of Beijing’s mercantilist policies and Washington’s unwillingness to respond.”

On Wednesday, the Bush administration criticized China for slowing the pace at which its currency was rising in value against the dollar, but announced that it had decided not to cite China as a currency manipulator. A citation would have triggered negotiations between the two nations.

That decision upset American manufacturers who believe that China’s undervalued currency is the key reason for the record trade gap between the two countries. A cheaper yuan makes Chinese goods less expensive for American consumers and U.S. products more expensive in China.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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