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Economy in Brief

U.S. Current Account Deficit Narrows in Q4 as Exports Rebound
by Carol Stone  March 16, 2011

The U.S. current account deficit narrowed in Q4 to $113.3B from a revised $125.5B in Q3. Consensus expectations had called for $110.0B. The ratio to GDP was 3.1%. For 2010 as a whole, the deficit came to $470.2B, or 3.2% of GDP.

The deficit on goods in Q4 was $156.2B, down from Q3's $170.8B; a resurgence in exports generated the improvement while imports were sluggish, rising just 0.8%. In all of 2010, exports totaled $1,288.7B, up 20.6% from 2009, and imports were $1935.7B, 22.9% above 2009.

The surplus on services was $39.5B in Q4, marginally larger than $38.2B in Q3. This balance moved in a narrow range during the year, averaging $37.8B in the four quarters, making a total of $151.4B for the whole year. Exports of services expanded 8.6% during the year from 2009, with marked turnarounds in travel and passenger fares. Imports of services expanded modestly from quarter to quarter during 2010 and for the year were 6.5% ahead of 2009. "Other transportation", i.e., mainly freight, stood out with a 17.7% bounce after plunging 22.6% during 2009's widespread contraction.

The balance on income eased again in Q4 to $38.6B from $41.3B in Q3 and $42.9B in Q2. The Q4 result reflected a sizable $8.0B increase in US income payments on foreign direct investment; US receipts of direct investment income also gained, but only $4.2B. For all of 2010, the balance on income was a surplus of $163.0B, a new record and a rebound of $41.6B after a deterioration of $30.6B in 2009.

Among financial flows, there was somewhat less movement in Q4 than Q3, with US assets abroad up by $241B compared to $341B in Q3, and foreign flows into the US at $274B, less than Q3's $489B. Foreign investors cut back on all major activities, as they bought fewer securities and less direct investment. On the US side, bank-related flows were smaller in Q4 than in Q3, but direct investment was moderately larger and securities investment about the same. For the year as a whole there were massively larger amounts of international funds flows through the US from both US and foreign investors. US flows abroad came to $1.025Tr and foreign flows here were $1.245Tr.

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

US Balance of Payments SA Q4'10 Q3'10 Q2'10 Year Ago 2010 2009 2008
Current Account Balance($ Bil.) -113.3 -125.5 -122.7 -100.9 -470.2 -378.4 -668.9
   Deficit % of GDP 3.1% 3.4% 3.4% 2.8% 3.2 2.7% 4.6%
 Balance on Goods ($ Bil.) -156.3 -170.8 -169.1 -140.1 -647.1 -506.9 -834.7
   Exports 5.8 2.2% 3.4% 17.8% 20.6 -18.1% 12.5%
   Imports  0.8 1.8% 6.3% 23.3% 22.9 -26.4% 7.9%
 Balance on Services ($ Bil.) 39.5 38.2 36.6 35.4 151.4 132.0 135.8
   Exports 1.2 3.2% 0.3% 7.7% 8.6 -6.0% 9.4%
   Imports 0.4 2.8% 0.8% 6.4% 6.5 -7.0% 8.5%
 Balance on Income($ Bil.) 38.6 41.3 42.9 35.1 163.0 121.4 152.0
 Unilateral Transfers ($ Bil.) -35.2 -34.2 -33.2 -31.3 -137.5 -124.9 -122.0
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