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Economy in Brief

U.S. Current Account Deficit Slightly Deeper in 1Q'08
by Tom Moeller June 18, 2008

During 1Q'08, the US current account deficit deepened slightly to $176.4 billion from a revised $167.2 billion during last year's final quarter. The Q1 deficit was deeper than the Consensus expectation for a figure of $173 billion.

The deepening pulled the deficit to 5.0% of GDP. That percentage has been fairly stable during the last three quarters and it is much reduced from its peak percentage late in 2005, of 6.5% of GDP.

During 1Q, the deficit on goods trade deepened slightly to $211.0 billion as higher oil prices raised imports by 3.3%. That increase was enough to deepen the deficit even though exports rose by a stronger 4.8% because imports are the greater total. The deficit on goods trade has been fairly steady near $200 billion since late-2005.

The effects of the lower U.S. dollar and the strength of foreign economies versus the U.S. continued to be apparent in the surplus in services trade. It grew to a record $36.1B, and prior figures were revised to show a larger surplus. Exports of travel services grew 23.1% y/y and passenger fares were up 23.9%, after a very much upwardly revised 30.9% y/y 4Q increase. Imports grew 28.9% but travel imports grew 73.4%. They have nearly doubled y/y while passenger fares grew 9.3% (19.8% y/y).

The trade surplus on earned income narrowed to $29.8B as the unilateral transfers deficit deepened to $31.2 billion.

From the capital account, the deficit on private direct investment narrowed to $39.0 billion from $52.7 billion in 1Q '07 as the level of foreign investment more than tripled versus the year earlier level.

Challenges for Health-Care Reform is yesterday's speech by Federal Reserve Board Chairman Ben S. Bernanke and it can be found here

US Balance of Payments, Bil.$, SA 1Q '08 4Q '07 Year Ago 2007 2006 2005
Current Account Balance ($ Bil.) -176.4 -167.2 -196.9 -731.2 -788.1 -729.0
  Deficit % of GDP -5.0 -4.8 -5.8 -5.3 -6.0 -5.9
  Balance on Goods ($ Bil.) -211.0 -208.9 -203.3 -819.4 -838.3 -787.1
    Exports  4.8% 2.6% 17.6% 12.3% 14.4% 10.8%
    Imports  3.3% 3.1% 11.6% 5.7% 10.7% 13.9%
  Balance on Private Services ($ Bil.) 36.1 35.1 23.8 119.1 85.0 75.6
    Exports 4.4% 4.9% 15.2% 13.4% 8.8% 11.1%
    Imports 3.3% 0.9% 9.9% 8.4% 11.3% 7.7%
  Balance on Income ($ Bil.) 29.8 36.3 12.9 81.8 57.2 67.2
  Unilateral Transfers ($ Bil.) -31.2 -29.8 -30.2 -112.7 -92.0 -89.8
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