The unexpectedly large deficit fuelled fears that the department will today cut its estimate of US economic growth in the second quarter.
The seasonally-adjusted trade gap between April and June was dollars 34.39bn (pounds 23m), up from dollars 29.31bn in the first quarter and above Wall Street forecasts. This was the biggest deficit since the last quarter of 1987. Non-military imports rose to a record dollars 147.51bn, while exports edged up to dollars 113.13bn.
The US had a dollars 3.5bn trade deficit with Western Europe in the second quarter, having run a dollars 1.1bn surplus in the first. The deficit with Japan fell by dollars 500m to dollars 14.1bn.
The dollar strengthened against the German mark in slack trading in New York despite fears that the downgrade to second quarter growth would be larger than first estimated. It closed 0.80 pfennigs up at DM1.6720, but was unchanged against the yen.
Separate figures showed that sales of new homes fell 5 per cent in July to an annual rate of 629,000, while the June figure was revised sharply downwards to 662,000.
The Commerce Department provisionally estimated that national output had grown at an annual rate of 1.6 per cent in the second quarter. Before yesterday's trade figures economists were already expecting this to be revised down to around 1.1 per cent.
The White House is expected to slash its current forecast of 3 per cent growth this year when it issues its review of economic prospects later in the week.
The gloom over growth failed to dent share prices in New York. By the close, the Dow Jones average was up 3.36 points at 3,643.99.
The Tokyo market closed higher for the fifth successive trading day. The Nikkei average was 121.01 points higher at 20,912.69.
The French stock market closed at its third successive record high, with the CAC-40 index rising 21.79 points to 2,205.67 in thin trading. The labour ministry announced that unemployment in France had risen by 26,000 in July to a record 3,211,800, 11.7 per cent of the workforce.