The US trade deficit hit a fifth straight annual record in 2006, driven by a record oil import tab and a flood of imports from China, a government report showed.

The Commerce Department said the trade gap expanded by 6.5% last year to an all-time high of $763.6 billion, as a record amount of imports swamped record exports.

The shortfall partly reflected a wider-than-expected December trade gap. That month, the deficit expanded 5.3% to $61.2 billion as oil prices rebounded and Americans imported record amounts of consumer goods and autos. It also marked the tenth time in 2006 that the monthly deficit exceeded $60 billion.

Wall Street analysts surveyed by Reuters on average had forecast a December deficit of $59.5 billion.

Economists said the larger-than-expected December trade gap, combined with other economic data, would require the government to lower its estimate of fourth quarter 2006 US economic growth from 3.5% currently.

“The numbers might slice a little off GDP ... This week we also have retail sales and other data that could have an offsetting effect. So far it looks like GDP will get revised down 1.2 to 1.3%age points,” said Doug Smith, chief economist for the Americas at Standard Chartered in New York.

Keith Hembre, chief economist with FAF advisors in Minneapolis, also expected a downward revision in fourth-quarter gross domestic product.

“It didn’t really pass the smell test in the first place ... It looks like 2.5% now,” Hembre said.

US Treasury Secretary Henry Paulson and other Bush administration officials have recently credited trade for contributing more than 1.6%age points to US economic growth in the fourth quarter.

US Treasury debt prices traded slightly higher after the trade data was released.

The dollar briefly lost a bit of ground, pushing the euro and yen higher. At 10 a.m. (1500 GMT) the euro was at $1.3014 and the yen at 121.37 to the dollar, almost unchanged from levels seen just before the trade data.

US exports of goods and services, which have benefited recently from stronger foreign economic growth and a decline in the value of the dollar, totaled a record $125.5 billion in December.

The same factors helped propel total exports in 2006 to a record $1.44 trillion, up 12.8% from the prior year. Exports grew faster than imports, which rose 10.5% in 2006 to $2.20 trillion.

Despite setting a record, the growth in the trade deficit slowed in 2006 from the blistering 17.3% pace in 2005.

“The trade deficit on a real goods and nominal basis is improving,” Hembre said.

US Trade Representative Susan Schwab said the growth in exports validated Bush administration policies aimed at opening markets around the world.

“The continued rise of exports reflects both stronger growth abroad and the ability of US businesses, farmers, ranchers and service providers to reap the benefits of freer trade and expanding markets,” Schwab said.

But labor federation AFL-CIO, one of the Bush administration’s biggest critics on trade, said immediate congressional action was needed to reverse the trade gap.

“Every day we continue following the Bush administration’s path on trade, we feed a dangerous, unsustainable deficit,” AFL-CIO Secretary-Treasurer Richard Trumka said.

With average prices for imported oil a record $58.00 per barrel in 2006, the United States’ imports of petroleum for the year rose to a record $302.5 billion. However, the deficit in non-oil goods also was a record at $547.2 billion.

The politically sensitive trade gap with China expanded 15.4% to a record $232.5 billion in 2006, despite record US exports to that country of $55.2 billion.

Imports from China surged 18.2% to a record $287.8 billion, ensuring that concerns about China’s exchange rate and other government policies, which US lawmakers and manufacturers believe unfairly aid Chinese companies, will remain a hot political topic in 2007.

The United States also ran record trade deficits with Japan and Mexico in 2006. (Reuters)