Sept. 12 (Bloomberg) -- The U.S. trade deficit unexpectedly surged to a record in July as an increase in imports signaled American consumers will keep the economy expanding.

Imports exceeded exports by $68 billion, the Commerce Department said in Washington, up from $64.8 billion in June. The gap exceeded estimates by all but one of the 69 economists surveyed by Bloomberg News before the report.

A growing appetite for Japanese electronics and clothing from China suggests American consumers are still spending even as the housing market sags, and that the U.S. economy needn't rely on foreign demand to fuel the expansion. Exports dropped 1 percent in July, partly because of a fall in aircraft sales.

``We have a slower growing economy, but it's still reasonably healthy and still drawing in a lot of imports,'' said Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York. ``While the U.S. economy has slowed, it hasn't cratered.''

The July deficit compares with the $65.5 billion median estimate in a Bloomberg News survey. Forecasts ranged from $60.5 billion to $70 billion.

The deficit adjusted for changes in prices, figures the government uses in its calculation of gross domestic product, widened in July to $59.1 billion, the highest since January. The increase suggests the nation's worsening trade balance will restrain economic growth this quarter.

Imports and Exports

The dollar weakened in the minutes after the report was released before recouping its losses to trade at $1.2687 per euro, from $1.2703 late yesterday. A widening deficit tends to weaken the dollar because it means more dollars have to be exchanged for foreign currencies to pay for imports.

Imports of goods and services rose 1 percent in July to $188 billion. Exports declined to $120 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.

``As long as the consumer is relatively healthy, we're going to see a wide trade deficit,'' said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut.

Signs of slowing economic growth abroad may also chip away at demand for exports, making it hard to narrow the shortfall. The European Central Bank forecasts that the expansion in the dozen euro nations will slow to 2.1 percent in 2007 from 2.5 percent this year.

China's Surplus

Some U.S. lawmakers hold China accountable for the swollen trade gap, saying China's currency policies keep the yuan artificially weak, boosting the Asian nation's exports. The trade deficit with China narrowed to $19.6 billion from $19.7 billion in June. It's close to the record $20.5 billion reached in October 2005.

China's trade surplus rose to a record for a fourth straight month in August, the Beijing-based customs bureau said yesterday. The ballooning surplus is flooding the economy with cash, hampering government efforts to rein in lending and investment. With the surplus likely to top last year's record $102 billion, Chinese Premier Wen Jiabao may be pressed to let the yuan rise faster to avoid U.S. trade sanctions.

U.S. Senator Charles Schumer, a New York Democrat, is ``very serious'' about forcing a vote this month on legislation to place punitive duties on all Chinese imports, his spokesman, Eric Schultz, said Sept. 6.

Today's report showed that imports from China rose to a record $24.6 billion in July. U.S. exports to the Asian nation increased to $5.1 billion, also the highest ever. The figures may increase pressure on U.S. Treasury Secretary Henry Paulson to convince China to revalue its currency before the tariff measure comes to a vote in the Senate. Paulson is scheduled to visit China after meetings of the International Monetary Fund in Singapore on Sept. 19-20.

`Proactive and Progressive'

China will be ``more proactive and progressive'' in allowing the market to set the currency's value, Finance Minister Jin Renqing said Sept. 8. The yuan last week reached its highest against the dollar since China ended its peg to the U.S. currency in July 2005.

A U.S. economy that's still growing faster than many of its trading partners may keep the trade deficit high. The Japanese economy expanded 2.5 percent in the second quarter from the same three months in 2005, compared with 3.6 percent growth in the U.S. during the same 12 months. In Germany, the economy grew 2.4 percent last quarter from a year earlier.

The U.S. rang up larger deficits with Germany, Japan, the Organization of Petroleum Exporting Countries, Canada and Taiwan in July.

Business Equipment

Imports of capital goods from overseas producers rose $800 million in July. American companies imported more computers, drilling equipment, machine tools and industrial machines during the month.

Japan's Komatsu Ltd., the world's second-biggest maker of earthmoving equipment, in July raised its full-year revenue and earnings forecasts when it reported a 79 percent jump in first- quarter earnings on strong overseas sales. Commercial building in the U.S. is helping drive sales of construction and mining equipment at Komatsu.

The U.S. petroleum deficit also increased in July because of higher prices. The value of crude oil imports rose to $20.8 billion during the month as the average price per barrel increased to a record $64.84 from $62.04.

Consumer goods imports increased $177 million in July, led by more overseas shipments of televisions, pharmaceuticals, toys and appliances.

Stronger global growth may also keep U.S. exports flowing, helped by a weaker dollar. The U.S. currency has declined 2.9 percent this year against a basket of currencies of major trading partners. U.S. companies exported more consumer goods in July.

The world economy will expand about 5 percent in 2006, and growth next year will be ``robust,'' Masood Ahmed, a spokesman for the International Monetary Fund, said Sept. 7.

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

Last Updated: September 12, 2006 17:38 EDT