Oct. 12 (Bloomberg) -- The U.S. trade deficit unexpectedly widened to a record $69.9 billion in August on a jump in imports that pushed the shortfall with China to an all-time high.

The deficit rose 2.7 percent from a $68 billion gap in July, the Commerce Department said in Washington, and exceeded the highest estimate in a Bloomberg News survey of economists. U.S. companies imported more computers, consumer goods and oil even as they shipped a record amount abroad.

The report was read as good news by economists, who said the gain in imports showed that consumer spending is holding up even as the economy slows. A weaker dollar and expansion in Europe and Asia are helping boost exports; at the same time a reduction in the deficit will be gradual because the economy is still growing faster than many of its counterparts.

``Strength in imports is typically associated with strong domestic demand,'' said Jim O'Sullivan, a senior economist at UBS Securities in Stamford, Connecticut. ``Both imports and exports are growing solidly lately, which very broadly is a sign of growth.''

Consumer spending, which accounts for two-thirds of the economy, ``increased more quickly in a number of districts,'' the Federal Reserve said today in its survey known as the beige book for the color of its cover. Four of the Fed's 12 districts reported that ``economic growth firmed'' in the last month.

`Big Surprise'

The August deficit compares with the $66.7 billion median estimate in a Bloomberg News survey of 66 economists. The dollar weakened. Stocks advanced.

``The big surprise is how well consumption has held up, in electronics and capital goods,'' said Kenneth Rogoff, a Harvard University economist. ``Autos and housing have been falling, but the rest held up.''

In a separate report, the Labor Department said today that first-time claims for jobless benefits rose last week from a two-month low. Claims increased 4,000 in the week that ended Oct. 7 to 308,000, a level that economists said is still consistent with a resilient labor market.

The politically sensitive deficit with China widened to $22 billion, exceeding the previous record of $20.5 billion reached in October 2005. Today's report showed that imports from China increased to an all-time high of $26.7 billion in August. U.S. exports to the Asian nation fell to $4.8 billion.

China Tension

The figures may aggravate tensions with the U.S. lawmakers who say an undervalued Chinese currency is unfairly helping the Asian nation's exporters. While the Chinese yuan has been allowed to gradually strengthen, today's numbers show it's done little to correct the imbalance with the U.S. The yuan last month had the biggest gain of any month since the country ended a link to the dollar in July 2005.

Senators Charles Schumer and Lindsey Graham last month agreed to drop their legislation to levy tariffs of 27.5 percent on imports from China. The measure was aimed at forcing that country to raise the value of its currency. They said they will work on new legislation next year that would prod the Chinese without running afoul of global trade rules. More than two dozen bills have been tabled in Congress seeking action against China.

``This new trade number should send up a red flag to anyone who cares about the competitiveness of the American economy, Representative Phil English, a Pennsylvania Republican, said in an interview. ``There's going to be enormous pressure in the Senate to move a China currency initiative. We can no longer be the default market that China is allowed to dump into by devaluing their currency.''

Impact on Growth

The deficit adjusted for changes in prices, figures the government uses in its calculation of gross domestic product, widened in August to $60.2 billion, the highest since January. The figures suggest the trade balance will detract from U.S. economic growth in the third quarter.

``Trade will still be a drag of about 0.8 percentage point on third-quarter growth,'' said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.

Total imports of goods and services rose 2.4 percent in August to $192.3 billion. Exports increased 2.3 percent to $122.4 billion. Because the U.S. imports about 50 percent more goods and services than it sells abroad, exports have to grow about twice as fast just to stabilize the deficit.

Imports of capital goods from overseas producers rose $963 million in August as companies bought more telecommunications equipment, semiconductors and industrial machines. Consumer goods imports rose $678 million to a record in August, led by televisions, appliances and apparel.

Consumer Spending

``There's very little evidence of a dramatic slowdown in consumer spending,'' said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut. ``Housing is providing less of a boost, but energy prices are coming down and income growth is solid.

Stanley said that while it's unclear yet whether importers are ordering more in anticipation of robust holiday sales, he expects fourth-quarter consumer spending to be ``strong.''

The value of crude oil imports rose to $27.2 billion during the month as the average price per barrel increased to $66.12 from $64.84. Prices have since fallen and may help reduce the deficit in coming months.

Crude oil futures on the New York Mercantile Exchange have averaged less than $60 in the first week of October, after reaching a record $77.03 in July. The decline in energy prices during August may have come too late to make a big difference in the trade balance during the month, economists said.

August may mark the peak in the U.S. shortfall as the effects of lower oil prices start to filter through in September, said David Watt, a senior economist at BMO Nesbitt Burns in Toronto.

Export Growth

Growing economies overseas are also allowing for increased exports. U.S. capital-goods exports increased $1.3 billion in August, led by more overseas shipments of commercial aircraft, industrial machines and computers.

Chicago-based Boeing Co., the world's second-biggest commercial-airplane maker, said it shipped 21 aircraft to foreign customers in August, up from 18 in July.

A weaker dollar, which makes American goods cheaper overseas, will also help grind down the U.S. trade deficit in coming quarters, economists said. The dollar has declined 2.2 percent this year against a basket of currencies of major trading partners.

A narrower trade deficit added 0.42 percentage point to economic growth in the second quarter, which expanded at an annual rate of 2.6 percent, the government said last month.

To contact the reporter on this story: Joe Richter in Washington at Jrichter1@bloomberg.net

Last Updated: October 12, 2006 16:38 EDT