The Commerce Department said the August trade deficit rose nearly nine percent from July to 46.3 billion dollars.

That was far worse than economists predictions of a 44.5 billion dollar gap.

Despite exports of goods and services edging up to a two-year high, imports jumped even higher.

"Our exports barely budged but we bought a lot more of just about everything including food, consumer goods, vehicles, capital goods and industrial supplies," said Joel Naroff of Naroff Economic Advisors.

Imports increased 2.1 percent from July, to 200.2 billion dollars, while exports edged up only 0.2 percent, to 153.9 billion dollars.

The August trade deficit was the second biggest since October 2008 when the global financial crisis accelerated, and confirmed a trend of widening gaps that began in mid-June 2009.

The strong surge in US demand for imports, despite a weaker dollar, could lower widespread expectations the Federal Reserve will resume major asset purchases to boost the recovery.

"The US is sucking in lots of goods from the rest of the world, which supports the case that monetary policy has already accomplished its job of reviving domestic demand," said Brian Wesbury, chief economist at First Trust Economic.

The US surplus in services, a key trade strength of the world's largest economy, shrank for the third consecutive month as imports of services reached a record high.

Americans' dependence on foreign oil and appetite for imported consumer goods once again caused imports to swell.

In August, exports of goods were virtually flat, while imports of goods jumped 3.9 billion dollars to 166.7 billion.

The department downwardly revised the July deficit to 42.6 billion dollars, from an initial report of 42.8 billion dollars.

The politically sensitive gap with China expanded eight percent, to 28.0 billion dollars wiping out the previous record of 27.9 billion dollars set in October 2008.

The United States has long criticized China's currency policy, accusing Beijing of keeping the yuan undervalued to gain an unfair trade advantage.

The monthly trade report came on the eve of the scheduled release Friday of the US Treasury Department's assessment on currency manipulation.

Treasury Secretary Timothy Geithner in April delayed the report, originally due an April 15, in a bid to pursue other ways to advance US interests with China.

Currency tensions boiled over at last week's annual meetings of the International Monetary Fund, with China rejecting calls for a quick yuan revaluation.

Thursday's trade report highlighted the difficulties of President Barack Obama's goal to boost exports to help get the economy into a sustainable recovery from the worst recession in generations.

The report added fuel to the growing furor over China, widely blamed in the United States for job losses as cheap Chinese manufactured goods pour into the economy.

The House of Representatives last month passed a bill that allows Washington to impose countervailing duties on imports from countries found to be manipulating their currencies.

The news of a record-high trade deficit with China, the country's second-largest trading partner, also came less than three weeks ahead of crucial November 2 mid-term elections.

Obama's Democratic Party is expected to lose seats in Congress to the Republican opposition.

"The ongoing, American job-destroying leakage of national wealth to China confirms the House's wisdom in passing the anti-currency manipulation bill last month," said Alan Tonelson, a research fellow at the US Business and Industry Council.

"President Obama finally needs to wake up as well, urge Senate passage, and help American businesses and their employees fight foreign protectionism," he said.

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