US: Current Account

Thu Jun 18 07:30:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Current Account $-116.5B $-123.5B to $-110.0B $-113.3B $-113.5B $-103.1B

The nation's current account deficit for the first quarter came in at the low end of expectations, at $113.3 billion, while the prior quarter is now revised more than $10 billion lower to a deficit of $103.1 billion. The gap relative to GDP is very manageable at 2.6 percent.

The first-quarter deficit shows a slight widening in the goods trade gap to $189.0 billion, up from $186.0 in the fourth quarter, offset a bit by strengthening in the nation's surplus on services exports, at $58.7 billion vs $57.6 billion in the fourth quarter.

The improved revision to the fourth quarter reflects a nearly $10 billion upward revision to the surplus on primary income to $60.0 billion. It's the comparison here that hurt the first quarter where the surplus is much lower at $50.8 billion.

Market Consensus Before Announcement
The nation's current account deficit for the first quarter is expected to rise slightly from the fourth quarter, to $116.5 billion vs $113.5 billion and reflecting the quarter's widening trade gap tied in part to the port slowdown.

The current account measures the United States' international trade balance in goods, services, and unilateral transfers on a quarterly basis. The levels of exports, imports and the current account indicate trends in foreign trade.

U.S. trade with foreign countries holds important clues to economic trends here and abroad. The data can directly impact all the financial markets, but especially the foreign exchange value of the dollar. The dollar can be particularly sensitive to changes in the chronic trade deficit run by the United States since this trade imbalance creates greater demand for foreign currencies.

The bond market is very sensitive to the risk of importing inflation or deflation. When Asian economies collapsed at the end of 1997, bond and equity investors feared that deflation in these economies would be transported to the United States. While goods inflation did decline modestly and momentarily, service inflation kept on ticking. Thus, the linkage is not so direct.

A chronic current account deficit also suggests that consumers and businesses in the United States are outspending their income. We are living on credit while foreigners are paying for our profligate ways.