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Economy in Brief

U.S. Current Account Deficit in 3Q'08 Narrowed
by Tom Moeller December 17, 2008

The US current account deficit narrowed last quarter to $174.1 billion from a slightly revised $180.9 billion during 2Q. The 3Q deficit was shallower than the Consensus expectation for a reading of $179 billion.

As a percentage of GDP the deficit shrank to 4.8%, near the shallowest since 2004. It is reduced from the peak percentage reached late in 2005 of 6.6% of GDP.

The 3Q deficit on goods trade narrowed to $214.7 billion and it has been steady since 2005. Lower oil prices and a weaker U.S. economy held import growth to just 1.4%. Export growth also slowed sharply to 2.7% as foreign economies weakened as well.

The balance on services trade grew to a record $38.2B. The lower dollar helped raise travel exports by 16.7% y/y while imports grew 4.8%. Passenger fare exports grew 29.6% y/y while imports rose 11.1%.

From the capital account, there was a small net inflow of funds of $9.5B versus a net outflow of $17.5B a year ago. The surplus is, however, down sharply from the peak. The deficit on U.S. private direct investment narrowed to it's least since early last year as U.S. investment grew but foreign investment fell.

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

US Balance of Payments SA 3Q '08 2Q '08 Year Ago 2007 2006 2005
Current Account Balance ($ Bil.) -174.1 -180.9 -175.0 -731.2 -788.1 -729.0
  Deficit % of GDP -4.8 -5.1 -5.0 -5.3 -6.0 -5.9
  Balance on Goods ($ Bil.) -214.7 -216.3 -201.2 -819.4 -838.3 -787.1
    Exports  2.7% 6.1% 17.3% 12.3% 14.4% 10.8%
    Imports  1.4% 4.7% 13.0% 5.7% 10.7% 13.9%
  Balance on Private Services ($ Bil.) 38.2 36.2 33.1 119.1 85.0 75.6
    Exports 3.1% 3.3% 10.2% 14.6% 11.5% 10.2%
    Imports 2.4% 2.0% 8.4% 8.4% 11.3% 7.7%
  Balance on Income ($ Bil.) 30.8 28.2 23.0 81.8 57.2 67.2
  Unilateral Transfers ($ Bil.) -28.4 -29.0 -27.8 -112.7 -92.0 -89.8
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