U.S. current account deficit widens in first quarter on income balance shortfall
A weaker primary income balance pushes the U.S. current account deficit higher in the first quarter, with the shortfall rising more than economists expect. The gap reaches $226.8 billion and accounts for 2.9% of gross domestic product, compared with 2.8% in the prior quarter.
Highlights
- U.S. current account deficit widens by $5.8 billion, or 2.6%, to $226.8 billion in Q1, surpassing Reuters' $215.0 billion forecast.
- Primary income balance swings to a $13.3 billion shortfall from a $3.431 billion surplus, offsetting a trade deficit narrowed to $165.8 billion.
- Primary income receipts fall to $396.1 billion while payments surge to a record $409.1 billion, contributing to the expanding deficit.
First-quarter deficit expands beyond forecasts
As reported by the Commerce Department's Bureau of Economic Analysis, the U.S. current account deficit, which tracks flows of goods, services and investments into and out of the country, rises by $5.8 billion, or 2.6%, to $226.8 billion in the first quarter.The fourth-quarter deficit is revised to $221.1 billion from the previously estimated $190.7 billion. Economists polled by Reuters had forecast the current account deficit would widen to $215.0 billion.
The first-quarter current account deficit equals 2.9% of gross domestic product, up from 2.8% in the October-December quarter. The measure peaks at 6.3% in the third quarter of 2006.
Income flows outweigh narrower trade gap
The primary income balance shifts to a $13.3 billion shortfall in the first quarter from a $3.431 billion surplus in the prior quarter. That change partly offsets an improvement in the trade deficit, which narrows to $165.8 billion from $177.3 billion in the October-December period.Primary income receipts fall to $396.1 billion from $402.2 billion, while primary income payments jump to a record $409.1 billion from $398.8 billion in the fourth quarter. The report also shows capital-transfer receipts increase by $3.3 billion to $3.4 billion, while payments decline by $0.9 billion to $2.0 billion.
The U.S. continues to hold a negative net international investment position, reflecting the gap between foreign financial assets owned by U.S. residents and liabilities owed to overseas investors. The current account deficit has no impact on the dollar because of the greenback's status as a reserve currency.
In our earlier coverage of the Federal Reserve’s review of its monetary-policy framework, we highlighted concerns that changes to how the Fed signals its reaction function could make interest-rate guidance less transparent. We noted that after years of missing the 2% inflation goal, any shift in communication risks unsettling market expectations and weighing on confidence in the Fed’s ability to deliver price stability.
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