| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Balance | $-205.5B | $-207.0B to $-190.0B | $-237.6B | $-194.8B | $-221.8B |
Highlights
The US current account deficit deepened substantially in the first quarter, to $237.6 billion from a revised fourth-quarter deficit of $221.8 billion. The latest deficit was 3.4 percent of nominal GDP, up from the prior quarter's 3.2 percent.
This nearly $16 billion widening mostly reflected greater red ink in the nation's goods deficit as related imports jumped $15.4 billion to dwarf a $2.3 billion rise in goods exports. Yet the mismatch masks an important positive: the gain in imports was led by capital goods (computers and machinery) which indicates rising business investment and with that an improving outlook for domestic production and productivity.
An increase in receipts of primary income in the first quarter, at $9.7 billion, was outmatched by a $12.9 billion increase in the payment of primary income, the latter mostly reflecting interest on long-term debt securities.
Note that the substantial revision to the fourth quarter (and with that the wide miss in the latest consensus) reflects the annual incorporation of newly available source data and also new seasonal and trading-day adjustments.
This nearly $16 billion widening mostly reflected greater red ink in the nation's goods deficit as related imports jumped $15.4 billion to dwarf a $2.3 billion rise in goods exports. Yet the mismatch masks an important positive: the gain in imports was led by capital goods (computers and machinery) which indicates rising business investment and with that an improving outlook for domestic production and productivity.
An increase in receipts of primary income in the first quarter, at $9.7 billion, was outmatched by a $12.9 billion increase in the payment of primary income, the latter mostly reflecting interest on long-term debt securities.
Note that the substantial revision to the fourth quarter (and with that the wide miss in the latest consensus) reflects the annual incorporation of newly available source data and also new seasonal and trading-day adjustments.
Market Consensus Before Announcement
The first-quarter current account deficit is expected to widen to $205.5 billion versus a narrower-than-expected deficit of $194.8 billion in the fourth quarter that benefited from strength in exports.
Definition
The current account, on a quarterly basis, measures the U.S. international balance in goods and services trade as well as unilateral transfers. (Bureau of Economic Analysis)
Description
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.
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.
