The July trade gap was wider than the consensus forecast for an increase to 58.0 billion dollars. It was the largest shortfall since March 2007 and followed two consecutive months of shrinking deficits.

The deficit rose nearly six percent from a June deficit of 58.8 billion dollars, revised sharply higher from the prior estimate of 56.8 billion.

Analysts said the July data indicated international trade likely will continue to underpin growth in the US economy, which accelerated to a 3.3 percent pace in the second quarter, as a weak dollar bolstered exports, though the dollar has recently strengthened.

"Trade volumes suggest that trade will add at least 1.0 percentage point to third-quarter growth, a solid contribution -- albeit less dramatic than the 3.1-percentage-point contribution in the second quarter," said Nigel Gault, analyst at Global Insight.

July exports rose 5.4 billion dollars to a total 168.1 billion dollars and imports were up 8.7 billion dollars to 230.3 billion, the department said.

On a 12-month basis, the July trade deficit was 4.9 billion dollars higher than a year ago.

Peter Morici, a University of Maryland economist, highlighted the huge trade deficit's weight on US gross domestic product (GDP) growth.

"Money spent on Middle East oil, Chinese televisions and coffee markers, Japanese and Korean cars can't be spent on US made goods and services, unless offset by a comparable amount of exports," Morici said.

"At about 5.2 percent of GDP, the trade deficit is a significant drag on economic growth and destroys millions of high-paying US jobs."

Morici predicted GDP growth "will slow or turn negative in the third and fourth quarters."

Oil imports accounted for more than half of the July trade gap, the Commerce data showed. Petroleum imports rose to 43.4 billion dollars from a revised 37.3 billion, the sharpest increase in the year to date, as crude oil prices skyrocketed.

The average price of imported oil shot up to 124.66 dollars a barrel, from 117.13 dollars in June.

Oil prices hit record highs above 147 dollars a barrel on July 11, but have since fallen about 30 percent as investors fret about softening demand in the slowing global economy.

The politically sensitive issue of ballooning Chinese imports was in focus. Chinese imports ballooned 16.1 percent to a seasonally adjusted 24.9 billion dollars.

The trade data comes ahead of high-level US-China trade talks next week in California. Critics say China maintains its yuan currency undervalued to bolster exports, and US lawmakers blame outsourcing to China for the loss of thousands of jobs.

Among major trading partners, the US trade deficit with the European Union leapt to unadjusted 11.0 billion dollars in July from 8.2 billion the prior month.

The gap with Canada rose 15.3 percent to 8.3 billion dollars and the deficit with Japan edged 3.3 percent higher to 6.3 billion dollars.

And the shortfall with the Organization of the Petroleum Exporting Countries (OPEC) surged 33.6 percent to a record 24.2 billion dollars.

However, with oil prices treading near 100 dollars a barrel and the dollar strengthening since July, the deficit was expected to shrink in following months.

"The energy situation has already been unwound and there could be a massive cut in the trade deficit was that works through the August and September numbers," said Joel Naroff at Naroff Economic Advisors.

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