Republicans said the latest deficit figures were a serious concern.

“The alarm bells on our nation’s fiscal condition have now become a siren,” said Senate Republican minority leader Mitch McConnell.

“If anyone has any doubts that this burden on future generations is unsustainable, they’re gone – spending, borrowing and debt are out of control.”

Analysts said the latest deficit figures increased the likelihood of US tax rises once it is confirmed that the country has exited recession.

The CBO said such a move would be required.

“Putting the nation on a sustainable fiscal course will require some combination of lower spending and higher revenues than the amounts now projected,” it said.

The US budget deficit will soar to almost $1.6 trillion (￡978bn) this year, the highest on record, both the White House and Congress have warned.

Fuelled by President Obama’s $787bn stimulus package and reduced tax revenues due to the recession, it compares with a $455bn deficit in 2008.

The White House says the deficit will grow further, predicting it will hit a cumulative $9tn from 2010-2019.

However, it continues to expect the US economy to start to recover this year.

The White House expects US unemployment to pass 10% this year, before slowly declining in 2010. The most recent official figures showed the rate at 9.4% in July.

‘Dire situation’

The latest deficit predictions have come from the White House and the non-partisan Congressional Budget Office (CBO). Read more…

The Ministry of Finance figures showed that exports to the US fell 39.5% in July from the same month last year, which was worse than the 37.6% fall in June.

Exports to China were down 26.5%, while those going to the European Union fell 45.8%.

Gross domestic product grew 3.7% in the three months from April to June, fuelled by an improvement in exports in the period, but there have been concerns that those figures were boosted by stimulus spending and scrappage schemes.

There are also concerns that domestic demand remains weak, with average salaries falling and the unemployment rate at a six-year high of 5.4%.

Japan’s trade surplus still rose, because imports fell 40.8%, largely due to lower energy costs.

Japanese exports slid in July at a faster annual rate than June, raising fears the effects of global stimulus measures are starting to decline.

Exports from the world’s largest exporter were down 36.5% last month compared with July 2008.

Slower car sales to the US, Middle East and Russia were blamed for the decline, which followed June’s 35.7% fall.

Figures released last week showed that Japan’s economy grew between April and June, ending its year-long recession.

But economists said these latest export figures indicated that reports of a global recovery could have been premature.

“Falls in exports have been moderating in recent months on companies’ restocking efforts and government stimulus worldwide, but the July data indicate that the recovery momentum is losing steam,” said Seiji Shiraishi, chief economist at HSBC Securities.

“It is questionable whether exports will continue to recover once the stimulus effect runs out.”