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Economy in Brief

· The U.S. current account deficit decreased yet again in Q2 to $98.8 billion from a revised $104.5 in Q1 (originally -$101.5 billion).  Consensus expectations called for a Q2 result of $92 billion.  As a percentage of GDP, the deficit was 2.8%, little changed from Q1's slightly revised 3.0%.  Still, this was the smallest such comparison since Q1 1999.
· The balance on goods, already evident in the monthly trade figures, was $115.5 billion in Q2, down from $124.0 billion in Q1.  As was the case in Q1, both exports and imports fell, but the decrease in the deficit resulted from a smaller decline in exports, just 1.3%, than in imports, 3.2%.  The balance on services also improved, but modestly, from a $31.6 billion surplus in Q1 to $32.5 billion.  Here too, exports edged down, 0.9%, but by less than imports 2.2%.  In all of these amounts, the changes were tiny compared with substantial declines in Q1, another sign of the economy's progress toward stabilization in Q2; indeed, the relatively better performance of exports of both goods and services suggests that other countries' recessionary conditions were also easing.  The balance on income eroded a bit, to $16.4 billion from a revised $18.3 billion in Q1; income receipts fell by $2.3 billion and income payments fell by $0.5 billion.  Unilateral transfers totaled $32.2 billion, up from $30.3 billion in the prior quarter; government grants rose in the latest period, government pension payments were basically unchanged and private remittances (i.e., foreign workers sending money back home) continued to decline, this last still another marker of recession.
· The financial account showed net inflows of $58.3 billion in Q2, up from $35.4 billion in Q1.  Reductions in US-owned assets abroad brought a net $41.9 billion back to the US as government holdings of foreign currency and other short-term assets fell by $198.3 billion while private investors increased their holdings of assets abroad by $148.4 billion.  This was the second successive quarter of net outflows of private capital after three periods of substantial repatriation.· Foreigners returned as net investors in the US, sending in $16.4 billion after two quarters of net sales of US assets.  This took place among foreign official assets, particularly moving into US Treasury securities.  Private foreign investors continued to liquidate positions in the US, this time by $108.6 billion, somewhat less than the Q1 $138.6 billion reduction in their holdings.  Such reductions, also including an even larger $176.8 billion in Q2 2008, are unprecedented in the history of this compilation, which extends back to Q1 1960. 
US Balance of Payments SA 2Q '09 1Q '09 4Q '08 Year Ago 2008 2007 2006
Current Account Balance ($ Bil.) -98.8 -104.5 -154.9 -187.7 -706.1 -726.6 -803.5
    Deficit % of GDP 2.8 3.0 4.4 5.2 5.0 5.3 6.1
  Balance on Goods ($ Bil.) -115.5 -124.0 -178.8 -221.5 -840.3 -831.0 -847.3
    Exports  -1.3% -14.2% -14.0% -26.1% 12.2% 12.1% 13.8%
    Imports  -3.2% -20.4% -16.0% -34.8% 7.5% 5.7% 10.7%
  Balance on Private Services ($ Bil.) 32.5 31.6 34.3 38.6 144.3 129.6 86.9
    Exports -0.9% -8.1 -4.7% -13.2% 8.9% 15.8% 12.0%
    Imports -2.2% -8.1 -5.5% -12.2% 8.0% 7.5% 11.3%
  Balance on Income ($ Bil.) 16.4 18.3 21.1 26.3 118.2 90.8 48.1
  Unilateral Transfers ($ Bil.) -32.2 -30.3 -31.5 -31.1 -128.4 -116.0 -91.3
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