Jan. 12 (Bloomberg) -- The U.S. trade deficit unexpectedly grew to $60.3 billion in November, the widest ever, as demand for oil and consumer goods pushed imports to a record. Exports fell.

The trade gap increased 7.7 percent from the previous high of $56 billion in October, the Commerce Department said today in Washington. The imbalance with China accounted for more than a quarter of the total deficit.

``We need to get more growth in the global economy,'' Treasury Secretary John Snow said in an interview, saying that the gap is a sign of U.S. economic strength. ``As our trade partners grow faster, that will be good for our exports.''

The unprecedented U.S. budget and trade deficits threaten a further erosion in the dollar, which fell 4.6 percent last year against a basket of currencies. To keep financing these shortfalls, foreign investors may demand higher interest rates for U.S. assets that they buy. A cheaper dollar also threatens to aggravate inflation by making imports more expensive.

November's trade deficit may shave as much as 1 percentage point off fourth-quarter growth forecasts, said economists including Stephen Stanley of RBS Greenwich Capital Inc. in Greenwich, Connecticut, and Ian Morris of HSBC Securities USA Inc. in New York.

Others, including Joseph LaVorgna at Deutsche Bank Securities Inc. in New York, said any negative effect from trade may be overcome by increased spending.

Fed Policy Implications

Fed policy makers are likely to use the numbers to continue raising the benchmark interest rate because of what the report shows about demand in the U.S., economists said.

``From an economic perspective, the rapid widening of the trade gap is a sign that monetary policy remains far too accommodative,'' said John Ryding, chief U.S. economist at Bear Stearns & Co. in New York. The policy making Federal Open Market Committee ``might worry'' about the impact on inflation.

``Unavoidable economic logic suggests that eventually this situation will prove unsustainable,'' Cathy Minehan, president of the Federal Reserve Bank of Boston, said in a speech today, citing the trade gap and the drain on national savings from the federal budget deficit.

Fed officials said at their Dec. 14 meeting that strengthening demand among U.S. trading partners was ``unlikely,'' according to minutes published last week.

The U.S. economy grew 4 percent in the third quarter from a year earlier, compared with 1.8 percent in the countries using the euro and 2.6 percent in Japan.

`Grand Canyon' of Deficits

``We now have the Grand Canyon of trade deficits, and there is no saying it will not widen further,'' Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, said. ``The ever widening trade chasm has to put further pressure on the dollar.''

The $561.3 billion excess of imports over exports through November exceeds the record $496.5 billion for all of 2003.

Economists expected the deficit to narrow to $54 billion for the month compared with a previously reported $55.5 billion in October, according to the median estimate of 70 forecasts in a Bloomberg News survey. The benchmark 10-year U.S. Treasury note fell 1/8 point, pushing the yield up to 4.25 percent at 11:43 a.m. in New York from 4.23 percent yesterday.

A cheaper dollar is supposed to strengthen exports by making U.S. goods cheaper, and exports had climbed to a record in October. The November drop in exports caught economists by surprise.

Imports

The decline in the dollar also has increased the overseas costs for companies such as Alcoa Inc., the world's biggest aluminum maker. The Pittsburgh company said two days ago that fourth-quarter profit fell 7.9 percent because of costs to sell some businesses and the weaker dollar.

The euro traded at $1.3274 at 11:36 a.m., compared with $1.3107 yesterday. The yen traded at 102.40 per dollar, compared with 103.32. The deficit with the 15-country European Union widened. The deficit with Japan was the largest since October 2000.

Imports rose 1.3 percent for the month to $155.8 billion. Exports fell 2.3 percent, the first decline since June, to $95.6 billion. Exports were $97.8 billion in October.

The trade deficit is a negative in the Commerce Department's estimates of gross domestic product because of the assumption that the imports replace U.S. products.

A Bloomberg News survey before today's report called for the economy to grow at a 3.9 percent annual rate in the final three months of 2004, compared with 4 percent in July-September.

Imports of oil, consumer goods and food and farm products rose to records. Petroleum imports were valued at $13.4 billion. Increased volume offset lower prices than in October, when futures prices reached a record.

Consumer Goods

Consumer goods imports rose 1.1 percent to $32.4 billion. Imports of autos and parts fell 2.3 percent to $19 billion. Capital goods imports were little changed at $29.7 billion.

Wholesalers rebuilt inventories at a stepped-up pace in October and November after consumer spending grew in the third quarter at a 5.1 percent annual rate, the fastest in almost three years, up from 1.6 percent in the second.

U.S. exports of consumer goods fell 2.6 percent to $8.6 billion. Foreign businesses also bought 5.1 percent less of capital goods. Services were a strong point, with exports rising to a record $29 billion.

China

The trade deficit with China narrowed to $16.6 billion from a record $16.8 billion. For the year, the trade gap with China is $147.7 billion, about one-fourth the U.S. deficit with all countries.

The U.S. is pressing China to change the yuan's decade-old peg of about 8.3 to the dollar, saying the fixed rate depresses the yuan's value, giving Chinese manufacturers an unfair advantage by making their goods cheaper abroad.

Lawmakers and manufacturers are also urging China's government to curb subsidies and clamp down on counterfeiting of trademarked goods.

``When China's leaders fail to produce results on the points of friction in our trading relationship, their failure only empowers those critics within the U.S. political system,'' Commerce Secretary Donald Evans said today in a speech to the American Chamber of Commerce in Beijing.

Outlook

A further decline in the value of the U.S. dollar and slower growth in consumer spending may trim the U.S. trade deficit by the end of this year, economists said.

Manufacturers say they are optimistic about the aid from the weaker dollar to exports.

``From the perspective of a manufacturer in North America, a somewhat weaker dollar makes us more competitive, and it's going to be favorable for the manufacturing economy into 2005,'' John Surma, chief executive of U.S. Steel Corp., said in an interview last week. The Pittsburgh company is the largest steelmaker in the Americas.

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

Last Updated: January 12, 2005 11:59 EST