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Economy in Brief

U.S. Current Account Deficit Narrows as Income Surplus Increases
by Gerald D. Cohen  September 19, 2019

The U.S. current account deficit narrowed to $128.2 billion during Q2'19 from an upwardly-revised $136.2 bil. during Q1'19 (was $130.4 bil.). The Action Economics Forecast Survey anticipated a $127.4 bil. deficit. As a percent of GDP, the deficit narrowed to 2.4% from an upwardly-revised 2.6% in Q1 (was 2.5%), and a six-and-a-half year high 2.8% in Q4'2018.

The smaller deficit last quarter was the result of an increase in the income surplus of $14.9 bil. which offset a $6.9 widening of the goods and services deficit. The goods trade deficit increased by $6.6 bil. to $223.3 bil. as exports fell 1.1% (-2.9% y/y) while imports increased 0.3% (0.7% y/y). Almost all categories of goods trade showed widening deficits, led by a $4.8 bil. worsening in the capital goods balance. The biggest improvement came from a $1.3 gain in foods, feeds and beverages, though that category still remains in deficit.

The surplus on services trade edged down to $60.0 bil. from a slightly downwardly revised $60.3 bil. (was $61.9 bil.). Services exports were unchanged in Q2 (+0.8% y/y) while service imports edged up 0.1% (5.8% y/y). Five of the nine services categories showed a worsening trade balance led by a $0.7 bil. decline in travel services. Meanwhile, the transportation services deficit narrowed by $0.7 bil.

The surplus on primary income increased to a record high $67.6 bil. though as a share of GDP it has hovered around 0.3% since 2012. Despite higher interest rates in the U.S. versus much of the rest of the world, the investment income balance rose to a record $70.8 bil. -- it has also been range-bound around 0.3% of GDP since 2012. The deficit on secondary income narrowed to $32.5 bil. from last quarter's record $36.6 bil.

Balance of Payments data are in Haver's USINT database, with summaries available in USECON. The expectations figure is in the AS1REPNA database.

US Balance of Payments SA Q2'19 Q1'19 Q4'18 2018 2017 2016
Current Account Balance ($ Billion) -128.2 -136.2 -143.9 -491.0 -439.6 -428.3
  Deficit % of GDP -2.4 -2.6 -2.8 2.4 2.3 2.3
 Balance on Goods ($ Billion) -223.3 -216.7 -232.3 -887.3 -805.2 -749.8
  Exports (% Chg) -1.1 0.5 -0.6 7.8 6.6 -3.6
  Imports (% Chg) 0.3 -2.1 0.3 8.6 6.9 -2.9
 Balance on Services ($ Billion) 60.0 60.3 61.2 259.7 255.1 246.8
  Exports (% Chg) 0.0 0.5 0.0 3.5 5.3 0.4
  Imports (% Chg) 0.1 1.4 2.4 4.3 6.3 4.0
 Balance on Primary Income ($ Billion) 67.6 56.9 60.1 254.0 225.8 198.7
 Balance on Secondary Income ($ Billion) -32.5 -36.6 -32.8 -117.3 -115.3 -124.0
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