Nov. 10 (Bloomberg) -- The U.S. trade deficit widened to a record $66.1 billion in September as the value of petroleum imports surged after Hurricane Katrina disrupted production in the Gulf Coast. Exports declined by the most in four years.

The shortfall in goods and services was more than economists forecast and followed a $59.3 billion deficit in August, the Commerce Department's figures showed today. The gap with China rose to a record $20.1 billion for the month, highlighting trade tensions as President George W. Bush prepares to travel to Beijing at the end of next week.

The cost of crude oil and other energy products dropped in October, suggesting the trade gap may narrow in coming months and reinforcing forecasts that the economy is recovering from the hurricanes. A 23 percent decline in gasoline prices since early September helped consumer sentiment rebound this month, according to a University of Michigan survey.

``The economy was most affected by the hurricanes in September and October and that effect is starting to fade,'' said Dean Maki, chief U.S. economist at Barclays Capital in New York. ``The November confidence survey shows the importance of the recent decline in gasoline prices and we believe the consumer spending numbers will be firming'' in coming months.

The University of Michigan's consumer confidence index rose to 79.9 this month from a 13-year low of 74.2. Retailers including Amazon.com predict strong holiday sales. The International Council of Shopping Centers said last week that same-store sales will rise 3 percent to 3.5 percent in November and December from the same two months last year, which would exceed last year's increase of 2.3 percent.

Dollar Strengthens

The dollar rose against the euro and the yen as the Michigan report reinforced speculation the Federal Reserve will keep raising interest rates. Against the euro, the dollar strengthened to $1.1688 from $1.1765 as of 4:08 p.m. in New York. The dollar climbed to 118.23 against the yen from 117.52 yesterday.

Economists expected the trade deficit to widen to $61.5 billion for the month compared with a previously reported $59 billion gap in August, according to the median of 66 estimates in a Bloomberg News survey. The estimates ranged from $58 billion to $65.5 billion.

The nation imported a record $23.8 billion worth of crude oil and petroleum products as prices jumped after Hurricanes Katrina and Rita.

The trade deficit also widened because of a 2.6 percent drop in exports, the biggest decline since September 2001. A strike at Boeing Co. contributed to a 72 percent drop in aircraft exports.

Deficit Stabilizing

The deficit may not widen much more in coming months, economists said, because oil prices have since receded, the Boeing strike was settled, and foreign economies are accelerating, suggesting exports may rebound.

``The trend appears to be a gradual improvement in the trade deficit or at least a stabilization,'' Peter Kretzmer, a senior economist at Banc of America Securities Inc. in New York, said before the report.

The October decrease in oil prices caused the cost of goods imported into the U.S. to fall 0.3 percent, the first drop since May, the Labor Department said in a separate report. Import prices excluding all fuels rose at the same pace as a month earlier, signaling companies are having limited success in passing on higher raw materials costs to consumers.

In a separate report, the department said first-time claims for unemployment benefits rose by 2,000 to 326,000 as workers displaced by Hurricane Wilma applied for compensation.

Job Growth

``Ex-Katrina, these numbers have been extraordinarily strong,'' said Drew Matus, a senior economist at Lehman Brothers Inc. in New York, in an interview. ``Job growth has been around 200,000 a month this year, excluding the last few months. The labor market is hot and getting hotter and that is one of the reasons the Fed continues to raise rates.''

Imports rose to a record $171.3 billion in September, reflecting greater demand for civilian aircraft, televisions and clothing as well as oil and natural gas. Imports of petroleum products rose to a record on a seasonally adjusted basis as the average price for the month jumped to a record $57.32 a barrel, compared with $53.65 in August.

In today's trading, crude oil and heating oil fell to the lowest level in more than three months after the International Energy Agency reduced its forecast of consumption.

China

The U.S. trade deficit with China for the first nine months of the year reached a record $146.3 billion, compared with $114.3 billion at the same time last year.

In October, China's trade surplus widened to a record $12 billion as exports of electronics surged, China's customs bureau reported today from Beijing. The surplus compares with $7.56 billion in September and brings China's surplus for the first 10 months of this year to $80.4 billion, from $11.1 billion in the same period a year earlier.

The U.S. and China agreed this week to limit exports of Chinese clothing through 2008. Bush is traveling to Asia as he seeks further trade concessions from China to forestall protectionist sentiment in the U.S. Congress.

Exports slumped to $105.2 billion in September from $108 billion the previous month.

A 28-day machinists strike at Chicago-based Boeing, the world's largest aircraft maker, ended on Sept. 29. After shipping just two planes to foreign buyers that month, Boeing delivered 13 aircraft to overseas clients in October, according to figures on the company's Web site.

Export Outlook

The outlook for all exports is improving as economies abroad gain momentum, economists said. A three-year slide in the dollar, which reduced its value by 17 percent against a basket of currencies from the nation's biggest trading partners, has helped stimulate exports by making American goods cheaper overseas, said Kretzmer.

While the dollar has regained about a fifth of its decline since reaching a low in March, exports will still benefit from a cheaper dollar, Kretzmer said.

``Trade is unlikely to be the drag on the economy it was before,'' he said.

To contact the reporters on this story: Carlos Torres in Washington ctorres2@bloomberg.net