U.S. Current Account Deficit Shrinks to its Least Since 1999

Last quarter's deficit on merchandise trade shrank to $171.8 billion, its least in three years. Goods exports rose 1.9% (3.8% y/y) last quarter, the strongest rise since Q3'11. Imports of goods increased marginally in Q4, up 0.8% y/y. The year's deficit of $703.9 billion was the smallest since the recession year of 2009.   

The trade surplus on services improved to $57.9 billion. Services exports increased 1.7% (4.5% y/y). Travel exports gained 2.1% (10.3% y/y) and passenger fares improved 2.8% (6.7% y/y). Imports of services rose 1.6% (4.1% y/y), as travel imports were up 2.7% (7.1% y/y). The $229.0 billion surplus on services trade last year set another record.

The surplus on income improved to a record $64.4 billion as receipts from abroad grew 4.7% y/y and payments to foreigners increased 1.3%. For the year, the surplus improved to a near-record $228.8 billion. 

From the capital account, the deficit on private direct investment abroad improved during the year to $166.3 billion, its least since 2010.   

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	Q4'13	Q3'13	Q1'13	2013	2012	2011
Current Account Balance ($ Billion)	-81.1	-96.4	-96.8	-379.3	-440.4	-457.7
Deficit % of GDP	-1.9%	-2.3%	-2.3%	-2.3%	-2.7%	-3.0%
Balance on Goods ($ Billion)	-171.8	-178.4	-175.0	-703.9	-741.5	-744.1
Exports	1.9%	0.6%	1.0%	1.8%	4.4%	16.1%
Imports	0.2%	1.0%	0.0%	-0.4%	2.8%	15.5%
Balance on Services ($ Billion)	57.9	56.9	57.5	229.0	206.8	187.3
Exports	1.7%	0.5%	1.7%	5.0%	5.2%	11.0%
Imports	2.4%	-0.7%	-0.9%	1.4%	4.6%	5.6%
Balance on Income ($ Billion)	64.4	59.1	55.2	228.8	223.9	232.6
Unilateral Transfers ($ Billion)	-31.6	-34.0	-34.5	-133.2	-129.7	-133.5

U.S. Mortgage Loan Applications Decline Further
by Tom Moeller  March 19, 2014

The Mortgage Bankers Association indicated that their total mortgage market index fell 1.2% last week (-51.8% y/y). Applications remained 63.3% lower than the peak in September 2012. Applications to purchase a home slipped 0.9% (-14.8% y/y) and were 24.2% below the peak this past May. Applications to refinance a loan declined 1.3% (-62.8% y/y) and were 74.0% below the peak in September 2012.

The effective interest rate on a 15-year mortgage was little-changed at 3.58%, up from the 2.89% low early in May of 2013. The effective rate on a 30-year fixed rate loan of 4.58% last week also remained higher than the 3.68% last May. Finally, the rate on a Jumbo 30-year loan of 4.45% compared to a low of 3.85%. For adjustable 5-year mortgages, the effective interest rate at 3.24% remained up from its low of 2.59% at the beginning of May, 2013.

Applications for fixed interest rate loans slipped 0.7% (-53.3% y/y) and were 65.3% below the September 2012 high while adjustable rate loan applications were off 6.2% (-20.0% y/y) and were 39.1% below last June's high. The average mortgage loan size slipped to $233,900 but still was up sharply from the $209,000 averaged in February of last year. The average loan size for home purchases slipped to $272,100 last week and for refinancings it was $204,500.

The survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver's SURVEYW database.

MBA Mortgage Applications (SA, 3/16/90=100)	03/14/14	03/07/14	02/28/14	Y/Y%	2013	2012	2011
Total Market Index	369.0	373.3	381.4	-51.8	616.6	813.8	572.3
Purchase	167.3	168.8	169.6	-14.8	197.5	187.8	182.6
Refinancing	1,528.4	1,547.9	1,597.6	-62.8	3,070.0	4,505.0	2,858.4
15-Year Mortgage Effective Interest Rate (%)	3.58	3.60	3.57	3.10 (3/13)	3.42	3.25	3.97

FOMC Pares Back Bond Purchases; Worries About Inflation Running Too Low
by Tom Moeller  March 19, 2014

At today's meeting of the Federal Open Market Committee, the Fed reduced the amount of its asset purchases of agency mortgage-backed and longer-term Treasury securities to $55 billion per month from $65 per month. It sighted broader economic strength and improvement in the labor market as rationales for the move.

The Federal funds rate was left unchanged in a range of 0.00% - 0.25% and the discount rate remained at 0.75%.

Economic goals continued to be consumer price inflation of 2 percent and maximum employment. Worries about economic performance were voiced if inflation continued to run under its objective, suggesting that a 6.5% unemployment rate might not be a firm target. 

GDP growth was projected for this year of 2.8% to 3.0% and next year of 3.0% to 3.2%. The unemployment rate target this year was reduced to 6.1% to 6.3% and next year to 5.6% to 5.9%. Core PCE inflation forecasts were left roughly unchanged at 1.4% to 1.6% this year and 1.7% to 2.0% for 2015.

The press release for today's FOMC meeting can be found http://www.federalreserve.gov/newsevents/press/monetary/20140319a.htm

Haver's SURVEYS database contains the projections from the Federal Reserve Board.