US: Current Account

Tue Sep 19 07:30:00 CDT 2017

Consensus Consensus Range Actual Previous Revised
Current Account $-115.1B $-118.1B to $-108.5B $-123.1B $-116.8B $-113.5B

The nation's current account deficit came in deeper than expected in the second quarter, at $123.1 billion which is well up from a revised $113.5 billion deficit in the first quarter. As a percentage of GDP, the current account deficit rose 2 tenths in the quarter to 2.6 percent which is moderate but still the highest rate since the first quarter of last year.

Inflating the deficit was a rise in the secondary income gap (current transfer payments), to $33.0 billion from the first quarter's $25.5 billion. In another negative, the surplus on primary income narrowed to $47.2 billion from $50.1 billion. The positive in the report is a narrowing in the goods and services trade gap, to a deficit of $137.3 billion from $138.1 billion.

Market Consensus Before Announcement
Helped by improvement in net exports, the current account deficit is expected to narrow in the second quarter to $115.1 billion from $116.8 billion in the first quarter. The account deficit relative to GDP has been moderate, at 2.5 percent in the first quarter.

The current account measures the United States' international trade balance in goods, services, and unilateral transfers on a quarterly basis. Readings in this report track trends in cross-border 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.