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Economy in Brief

U.S. Current Account Deficit Eases in Q2
by Carol Stone September 14, 2006

The US current account deficit shrank a bit in Q2 to $190.8 billion from $197.1 billion in Q1. The figure was very close to consensus expectations for Q2 of $190.5 billion. Q1's deficit was revised larger by $4.5 billion.

The latest deficit equaled 5.5% of GDP, down from 5.8% in Q1 and 6.2% for all of 2006.

The deficit in merchandise trade deteriorated slightly to $204.2B from Q1's deficit of $200.9B. Exports grew $9.2B in the quarter, equal to 3.4% (10.6% y/y). Imports increased 2.7% (4.3% y/y), but since imports are far larger, that is a $12.6B increase.

The surplus in services trade improved by $3.2B in the quarter to $26.5B, a new record. The previous high was $25.0B in Q4 1996. All major service sector categories contributed: more foreign tourists, less American use of foreign airlines, an increase in net private services, a gain in net royalties and fees and so on.

The U.S. capital account widened marginally in Q2 to $589 million, although this is noticeably smaller than the year-earlier $1.0 billion. Among the financial accounts, the net inflow of direct investment funds was $2.1B, a sharp turnaround from Q1's outsized outflow, $69.5B. Other private financial assets saw a net inflow of $79.2B, slightly less than $84.0B in Q1.

US Balance of Payments,
 Bil.$, SA
Q2 2007 Q1 2007 Q4 2006 Year Ago 2006 2005 2004
Current Account Deficit -190.8 -197.1 -187.9 -205.6 -811.5 -754.8 -640.2
Goods & Services -177.7 -177.6 -176.9 -192.6 -758.5 -714.4 -612.2
    Exports % change 3.5% 1.2% 3.2% 11.0% 12.7% 10.9% 13.7%
    Imports % change 2.4% 0.9% -1.9% 4.4% 10.4% 12.9% 16.8%
Income (Bil.$) +9.4 +7.5 +9.7 +10.7 +36.6 +48.1 +56.4
Unilateral Transfers -22.5 27.0 20.7 23.7 89.6 88.5 88.4
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