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Economy in Brief

U.S. Current Account Deficit Improved Slightly
by Tom Moeller December 16, 2005

The US current account deficit improved slightly last quarter to $195.8B but it was from a 2Q deficit that was revised deeper. Also lessening the economic significance of the improvement, it was entirely due to a narrower unilateral transfers deficit caused by private transfers associated with hurricanes and homeland security.

The 3Q current account deficit amounted to 6.2% of GDP and is averaging 6.4% this year versus 5.7% in 2004. Consensus expectations had been for a deepening of the 3Q deficit to $204.6B.

The deficit in merchandise trade deteriorated to a record $197.9B from $186.9B in 2Q. Exports grew just 0.8% (10.0% y/y), held back by the damage to Gulf Coast port facilities caused by Hurricane Katrina. Imports, meanwhile, rose 3.1% (13.6% y/y) in large part due to the 17% surge in value of petroleum products.

The surplus on services improved for the fourth consecutive quarter to $15.1B and rose versus a surplus of $10.3B a year ago. Exports of services grew 1.9% (11.7% y/y and imports were roughly flat q/q (6.8% y/y).

From the capital account, net US foreign direct investment abroad was positive for the first time since 1982 while foreign direct investment in the US surged to its highest since 2001.

US Int'l Balance of Payments 3Q '05 2Q '05 Y/Y 2004 2003 2002
Current Account Deficit $195.8B $197.8B $167.0B $668.1B $519.7B $475.2B
  Goods/Services/Income Deficit $182.3B $175.1B $151.2B $587.1B $448.5B $411.2B
    Exports 2.6% 3.6% 13.9% 14.9% 6.8% -3.7%
    Imports 3.0% 3.0% 15.8% 18.1% 7.3% 1.6%
  Unilateral Transfers Deficit $13.5B $22.6B $20.5B $80.9B $71.2B $64.0B
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