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Economy in Brief

U.S. Current Account Deficit Slightly Deeper in 2Q'08
by Tom Moeller September 17, 2008

The US current account deficit deepened slightly last quarter to $183.1 billion from a revised $175.8 billion during 1Q. The 2Q deficit was slightly deeper than the Consensus expectation for a reading of $179.9 billion.

As a percentage of GDP the deficit fell to 5.1%. That level has been fairly constant during the last year. It is reduced, however, from its peak percentage late in 2005, of 6.5% of GDP.

During 2Q, the deficit on goods trade deepened again just slightly to $216.3 billion. Higher oil prices raised imports by 4.7% though exports continued firm and they rose by a stronger 6.1%. The deficit grew because imports are the greater total versus exports. The deficit on goods trade has been fairly steady near $200 billion since late-2005.

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 $35.8B but prior figures were revised to show a smaller surplus. Exports of travel services grew 22.0% y/y and passenger fares were up 31.8%, the strongest y/y gain since late-1990. Imports grew 8.9% and travel imports grew 9.1%. Passenger fares grew 16.5% y/y.

The trade surplus on earned income narrowed to $27.3B but the 1Q surplus was revised up sharply. The deficit on unilateral transfers narrowed just slightly to 29.9B.

Oil and U.S. Macroeconomy: An Update and a Simple Forecasting Exercise from the Federal Reserve Bank of St. Louis can be found here.

The Credit Crunch of 2007-2008: A Discussion of the Background, Market Reactions, and Policy Responses also from the Federal Reserve Bank of St. Louis is available here.

US Balance of Payments, Bil.$, SA 2Q '08 1Q '08 Year Ago 2007 2006 2005
Current Account Balance ($ Bil.) -183.1 -175.6 -194.1 -731.2 -788.1 -729.0
  Deficit % of GDP -5.1 -5.0 -5.8 -5.3 -6.0 -5.9
  Balance on Goods ($ Bil.) -216.3 -211.0 -205.9 -819.4 -838.3 -787.1
    Exports  6.1% 4.8% 20.7% 12.3% 14.4% 10.8%
    Imports  4.7% 3.3% 14.1% 5.7% 10.7% 13.9%
  Balance on Private Services ($ Bil.) 35.8 33.9 27.1 119.1 85.0 75.6
    Exports 2.7% 1.2% 14.1% 14.6% 11.5% 10.2%
    Imports 1.8% 2.8% 8.9% 8.4% 11.3% 7.7%
  Balance on Income ($ Bil.) 27.3 33.2 9.7 81.8 57.2 67.2
  Unilateral Transfers ($ Bil.) -29.9 -31.7 -25.0 -112.7 -92.0 -89.8
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