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Economy in Brief

U.S. 1Q'09 Current Account Deficit Shrinks To Smallest Since 2001
by Tom Moeller June 17, 2009

The U.S. current account deficit shrank to its lowest level since 2001 as the recession and lower oil prices limited imports. Despite recessions abroad which lowered U.S. exports, imports fell even more rapidly. The deficit of $101.5 billion was deeper than the Consensus expectation for a reading of $85.0 billion.

As a percentage of GDP, the shrinkage of the U.S. deficit was dramatic. The 2.9% 1Q figure was the smallest since early-1999. This percentage is sharply reduced from the 6.6% peak reached late in 2005.

Recession in the U.S. worked with the decline in oil prices to drop the 1Q deficit on traded goods to $124.0 billion, its lowest since 2004. Though growth in goods exports was a negative 21.0% y/y, imports fell by a greater 30.1% spurred by the drop in oil prices.

Fewer U.S. citizens went abroad this year and more came here. As a result, the balance on services trade narrowed as exports fell more then imports. The 1Q surplus of $32.8 billion compared to a peak surplus of $40.0 billion late during 2007. That decline came as exports fell 7.2% y/y against a 6.4% decline in imports.

From the capital account side of the ledger, the U.S. balance on private direct investment remained stable and slightly positive q/q. That compares with deficits during the last three years. U.S. investment abroad rose while foreign investment here fell sharply.

Ties that bind: bilateral trade's role in synchronizing business cycles from the Federal Reserve Bank of Dallas can be found here.

US Balance of Payments SA 1Q '09 4Q '08 Year Ago 2008 2007 2006
Current Account Balance ($ Bil.) -101.5 -154.9 -179.3 -706.1 -726.6 -803.5
    Deficit % of GDP 2.9 4.4 5.1 5.0 5.3 6.1
  Balance on Goods ($ Bil.) -124.0 -178.8 -218.8 -840.3 -831.0 -847.3
    Exports  -14.2% -14.0% -21.0% 12.2% 12.1% 13.8%
    Imports  -20.4% -16.0% -30.1% 7.5% 5.7% 10.7%
  Balance on Private Services ($ Bil.) 32.8 34.3 36.2 144.3 129.6 86.9
    Exports -5.7 -4.7% -7.2% 8.9% 15.8% 12.0%
    Imports -6.2 -5.4% -6.4% 8.0% 7.5% 11.3%
  Balance on Income ($ Bil.) 19.3 21.1 36.7 118.2 90.8 48.1
  Unilateral Transfers ($ Bil.) -29.6 -31.5 -33.3 -128.4 -116.0 -91.3
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