Recent Updates

  • Israel: Average Housing Prices (Q2)
  • Japan: NCI Economic Activity Index (Aug)
  • US: NAHB/Wells Fargo Housing Market Index (Aug)
  • Canada: Wholesale trade, MSIO (June)
  • Pakistan: Foreign Currency Deposits and Utilization (JUL)
  • more updates...

Economy in Brief

U.S. Budget Deficit Deepened Due To Widespread Spending
by Tom Moeller September 14, 2005

In August, the U.S. federal government ran a budget deficit of $50.0B. That was slightly deeper than Consensus estimates but it was quite a bit deeper than a $41.1BB deficit last August. Nevertheless, the deficit of $352.6B during the first eleven months of FY 2005 was 19% lower than the prior fiscal year's first eleven months.

Overall, U.S. net outlays grew 6.8% during the first eleven months of FY05. A 20.3% y/y gain in federal outlays on defense (19% of total outlays) counted for much of the deterioration in the deficit picture versus last August. That rise lifted defense spending by 7.3% in fiscal year 2005 versus 2004. Medicare spending (12% of total outlays) also popped 29.6% versus August of 2004 and FYTD growth accelerated to 9.4%. Growth in spending on social security (21% of total outlays) was about stable at 5.6% though spending on health programs (10% of the total) picked up a bit to 4.4%. Spending on education & training (4% of the total) surged 51% versus last August and grew 15.3% FYTD while interest expense (8% of the total) grew 11.7% with higher interest rates versus declines last year.

Net receipt growth at 13.7% during the first eleven months of FY05 continued to reflect the improved economy. Individual income taxes (44% of total receipts) rose 15.3% and corporate income taxes (10% of total receipts) rose 41.3%. The improved job market raised employment taxes (36% of total receipts) by 8.1%.

Do Productivity Growth, Budget Deficits, and Monetary Policy Actions Affect Real Interest Rates? Evidence From Macroeconomic Announcement Data from the Federal Reserve Bank of St. Louis is available here.

US Government Finance Aug July FY '05 - YTD FY2004 FY2003 FY2002
Budget Balance $-50.0B $52.8B $-352.6B $-412.1B $-377.6B $-157.8B
  Net Revenues $155.4B $142.1B 13.7% 5.5% -3.8% -6.9%
  Net Outlays $205.4B $194.9B 6.8% 6.1% 7.4% 7.9%
large image