WASHINGTON - THE US trade deficit rose unexpectedly in October as a weak global economy hurt both imports and exports and the gap with China widened, a government report showed on Thursday.

The 1.1 per cent deficit jump in October to 57.2 billion dollars (S$85.12 billion) contrasted with analysts' expectations of a drop to 53.5 billion dollars and fuelled fears of a sharper than expected contraction of the world's most developed economy.

The politically sensitive trade deficit with China increased marginally to 27.9 billion dollars in October from 27.8 billion dollars the previous month, the Commerce Department report said.

The total volume in US goods and services trade fell 1.7 per cent in October, with declines in both imports and exports, also pointing to a deepening global economic crisis, the report showed.

October imports fuelled by petroleum were down 1.4 per cent from September to 208.9 billion dollars while exports dipped 2.4 per cent across all the major categories to 151.7 billion dollars.

It marked the third straight month of declining exports and imports, underscoring weakening US international trade amid the global slowdown from record peaks in July, when US exports hit 168.1 billion dollars and imports 229.4 billion dollars.

The total trade deficit for the first 10 months of 2008 was 590.9 billion dollars with analysts expecting it to cross the 700 billion mark for the whole year.

'As world growth slows dramatically, and many of America's largest trading partners slide into recession, export markets are looking significantly more challenging for US firms,' said Mr Meny Grauman of CIBC World Markets.

Export demand, a key support for growth in the first three quarters of 2008, 'is in the process of collapsing in response to recessionary conditions in Europe and Japan, as well as the sharp rebound in the US dollar', said IHS Global Insight economist Brian Bethune.

The global slowdown is also curbing US investment in plant and equipment, noted Mr Christopher Cornell, an economist at Moody's Economy.com.

Exports of industrial supplies and materials and imports of capital goods both fell in October, leading declines of their respective categories, he said.

'Investment is strongly procyclical, and these constitute another indicator of a global recession,' he said.

The October trade figures also signalled a steeper decline in economic growth for the fourth quarter of 2008.

They 'imply that a larger share of the rapid decline in US domestic demand will come from falling domestic production than previously estimated, pushing down GDP at a pace in excess of five percent annualized', said Mr Peter Kretzmer, senior economist with Bank of America.

Exports of civilian aircraft were down 28 per cent to 1.6 billion dollars, which could be partly attributed to a Boeing strike that ended late October.

Net imports of petroleum in October rose by 2.5 per cent to 32.7 billion dollars and experts said the trade deficit would have improved had it not been for the oil buying surge in the aftermath of the September hurricanes.

The trade deficit with Canada, the US largest trading partner, narrowed by 21 per cent to six billion dollars in September. The gap with Mexico, the second largest trading partner, narrowed by 2.8 per cent to 4.8 billion dollars.

The deficit with Japan rose to 6.0 billion from 5.6 billion dollars.

The yawning trade gap with China remains a concern as it accounts for nearly 60 per cent of the total deficit in manufactured goods, said the American Manufacturing Trade Action Coalition.

'The fact that a single country, China, now accounts for almost 60 per cent of the US trade deficit in manufactured goods should gravely concern president-elect (Barack) Obama and the Congress,' said Mr Auggie Tantillo, the coalition's executive director. -- AFP