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Economy in Brief

U.S. Current Account Deficit Narrowed Unexpectedly
by Tom Moeller June 16, 2006

The US current account deficit narrowed last quarter to $208.7B versus a revised record during 4Q '05 of $223.1B. The deficit during 1Q '06 equaled 6.4% of GDP, about stable with 6.3% for all of last year .

Consensus expectations had been for a 1Q deficit of $222.0B. Much of the surprise was narrowing of the unilateral transfers deficit to $19.9B from $26.2B during 4Q '05.

The deficit in merchandise trade improved to $208B from the record $212.5B in 4Q which was little revised. Exports jumped another 5.0% (14.2% y/y) while imports grew just 1.6% (13.8% y/y).

The surplus in services trade fell slightly to $17.2B from an upwardly revised $17.7B surplus during 4Q. Exports of services grew 1.9% (8.4% y/y) while imports grew 3.0% (7.3% y/y), the strongest quarterly growth since 4Q '04.

From the capital account, net US foreign direct investment abroad fell sharply to $61.8B, its weakest since 4Q '04. Foreign direct investment in the US, however, rose to $33.3B (9.0% y/y).

Energy and the Economy, yesterday's speech by Fed Chairman Ben S. Bernanke, is available here.

US Int'l Balance of Payments 1Q 06 4Q '05 Y/Y 2005 2004 2003
Current Account Deficit $208.7 $223.1B $191.7B (1Q05) $791.5B $665.3B $527.5B
  Goods/Services/Income Deficit $188.8 $196.9B $164.5B $705.4B $583.7B $458.3B
    Exports 5.0% 4.4% 16.9% 14.6% 15.7% 5.9%
    Imports 2.3% 6.9% 16.3% 16.3% 18.7% 7.4%
  Unilateral Transfers Deficit $19.9B $26.2B $27.2B $86.1B $81.6B $69.2B
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