US: Current Account

Thu Sep 17 07:30:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Current Account $-113.5B $-119.0B to $-109.3B $-109.7B $-113.3B $-118.3B

The nation's current account deficit came in at the low end of expectations in the second quarter, at $109.7 billion vs a revised $118.3 billion in the first quarter. The narrowing is concentrated in the trade gap which narrowed $4.3 billion in the quarter on improvement in the goods deficit and continuing gains in the service surplus. Balances on income also improved. The gap relative to GDP came in at a manageable 2.5 percent vs 2.7 and 2.3 percent in the prior two quarters.

Market Consensus Before Announcement
The current account deficit is expected to hold little changed at $113.5 billion in the second quarter vs $113.3 billion in the first quarter. A strengthening in the nation's surplus on service exports helped hold down the first-quarter deficit. The gap relative to GDP in the first quarter was a manageable 2.6 percent.

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.