The US current account deficit fell last quarter to $172.9 billion from $177.4 billion in Q3. The Q4 deficit was shallower than Consensus expectations for a deficit of $184 billion.

The latest deficit totaled 4.9% of GDP and it peaked as a percentage of GDP nearly two years ago at 6.8% in Q4 2005.

That shrinkage occurred even though the deficit on merchandise trade deepened. Higher oil prices lifted imports and the goods deficit grew to $208.1B from Q3's revised deficit of $200.5B. It was the deepest deficit in just over a year. During the last year only, however, exports grew 14.2% and outpaced import growth of 9.8%.

The effects of the lower U.S. dollar and the strength of foreign economies versus the U.S. is apparent greatest in the surplus in services trade which grew to a record surplus of $30.2B from $28.0B in 3Q. Exports of services during the last year grew 15.2%. Travel exports grew 21.4% y/y and passenger fares were up 19.2%. Imports grew a slower 11.5% due to moderate 7.3% growth in travel and 9.3% growth in passenger fares.

The trade surplus on earned income grew to $33.0B as the unilateral transfers deficit deepened to 28.1B.

Friedman and Taylor on Monetary Policy Rules: A Comparison from the Federal Reserve Bank of St. Louis is available here.