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Economy in Brief

U.S. Current Account Deficit Widens in Q3 
by  Tom Moeller   December 17, 2010

Figures released yesterday indicated that the U.S. current account deficit widened in Q3 to $127.2B from a revised $123.2B in Q2. The figure was slightly deeper than Consensus expectations for $126.0B. The Q2 ratio to GDP was 3.5%, its deepest since Q4 2008. A deeper deficit in the goods trade offset slight improvement in services versus Q2.

The deficit on goods deteriorated to $171.2B in Q2. While 2.2% quarterly growth in exports exceeded the 1.7% growth in imports, the deficit grew due to imports' larger dollar value. Nevertheless, versus last year growth in exports of 20.2% was short of the 23.3% growth in imports due to the earlier and firmer economic U.S. economic recovery versus the rest of the world.

The surplus on services grew slightly to $36.8B last quarter from a lessened $36.5B in Q2. This modest q/q improvement was in contrast to the marked improvement since the Q3 2009 balance of $32.8B. Versus last year, services exports grew 9.2% versus 8.1% growth in imports. Much of that divergence was due to a 12.7% rise in travel exports versus a 3.8% rise in imports. Passenger fare exports rose 26.5% y/y versus a 12.0% y/y import rise.

The balance on income deteriorated to $41.1 billion in Q3 from an upwardly revised $43.0B the quarter before. Income receipts totaled $165.5B billion, up just $1.7B from Q2 (12.9% y/y). Income from U.S. private direct investment abroad, i.e., interest and dividends, gained $1.5B to $106.6B (18.9% y/y) but Q3 income payments on foreign owned assets rose $4.1B to $121.6B from $118.0B in Q2. Income paid on foreign direct investment rose to $37.6B, up nearly two-thirds y/y. Finally, unilateral transfers held roughly stable q/q with a net outflow of $33.9 billion in Q3.

From the U.S. capital account, U.S. direct investment abroad fell $10.6B q/q to $83.1B while payments to foreigners on investment here rose $52.4B to $70.5B.

Balance of Payments data are in Haver's USINT database, with summaries available in USECON.

US Balance of Payments SA Q3'10 Q2'10 Q1'10 Year Ago 2009 2008 2007
Current Account Balance($ Bil.) -127.2 -123.2 -109.2 -97.5 -378.4 -668.9 -718.1
   Deficit % of GDP 3.5% 3.4% 3.0% 2.4% 2.7% 4.6% 5.1%
 Balance on Goods ($ Bil.) -171.2 -169.6 -151.3 -132.1 -506.9 -834.7 -823.2
   Exports 2.2% 3.4% 5.2% 20.2% -18.1% 12.5% 12.0%
   Imports  1.7% 6.3% 6.1% 23.3% -26.4% 7.9% 5.8%
 Balance on Services ($ Bil.) 36.8 36.5 36.9 32.8 132.0 135.8 121.1
   Exports 2.3% 0.3% 2.6% 9.2% -6.0% 9.4% 17.1%
   Imports 2.9% 0.8% 2.1% 8.1% -7.0% 8.5% 9.1%
 Balance on Income($ Bil.) 41.1 43.0 40.2 35.5 121.4 152.0 99.6
 Unilateral Transfers ($ Bil.) -33.9 -33.2 -34.9 -33.6 -124.9 -122.0 -115.6
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