The Treasury recorded a budget surplus of $89.3 billion in August compared with a deficit of $219.6 billion in August 2022 and compared with expectations centering on a deficit of $223 billion for the latest month. Forecasts ranged from a deficit of $245 billion to a surplus of $90 billion but most estimates called for deficits of more than $200 billion. The surplus was the same $89.3 billion when the monthly budget statement was adjusted for calendar differences.

The August budget surplus reflected outlays at $193.9 billion, way down from $523.3 billion in August of last year, while receipts at $283.1 billion compared with $303.7 billion last year. For the fiscal year to date, outlays are up 3 percent at $5.496 trillion and receipts are down 10 percent at $3.972 trillion from the year to date period in 2022.

A Treasury official told reporters the surplus, the first for an August since 1955, reflected a paperwork adjustment after the Treasury was obliged to cancel planned student loan forgiveness. Treasury called this a"subsidy modification." The official said revenues a year ago were boosted by a bump in capital gains collections which was lacking this year.

The nation's budget deficit is expected to widen to $223.0 billion in August, up from $219.6 billion in August a year ago, and $220.8 billion in July.

The U.S. Treasury releases a monthly account of the surplus or deficit of the federal government. Changes in the budget balance reflect Federal policy on spending and taxation. The government's fiscal year begins in October.

The budget data have several direct and indirect meanings for the financial markets. The most direct relationship lies between the size of the budget deficit and the supply of Treasury securities. The higher the deficit, the more Treasury notes and bonds the government must sell to finance its operation. From there it's simple supply and demand -- if demand is constant but the supply of bonds goes up, the price goes down. The same is true if the deficit falls or is eliminated altogether -- the government needs to sell fewer Treasury bonds, so the supply drops and the price of T-bonds rises. In the past few years, the budget deficit has increased dramatically, and this has put more Treasury securities into the market place.

The Federal government borrows money through the issuance of Treasury securities; so higher deficits mean a larger supply of securities and (again, assuming constant demand) lower prices. With notes and bonds, lower prices are equated with higher yields, so in this example, the government borrows money at higher interest rates. That impact ripples across all other interest rate-bearing securities and creates a higher interest-rate environment for stocks, which is bearish.

In addition to following the trend in the budget deficit or surplus, investors can gain valuable insight to the state of the economy by looking at the government's tax receipts. Higher tax receipts lead to an improved deficit situation when economic conditions are strong; conversely, lower tax receipts reflect a sluggish economic environment.