The fourth quarter 2024 current account deficit of $303.9 billion is well above the consensus of $330.0 billion deficit in the Econoday survey of forecasters. The current account deficit for the third quarter 2024 is only slightly revised at $310.3 billion. Total exports of goods, services, and receipts is up 1.3 percent in the fourth quarter to $1,223.7 billion while imports of goods, services, and payments are up 0.6 percent to $1,527.7 billion.

Exports of goods are down 2.0 percent in the fourth quarter to $519.2 billion. Most goods categories register declines in the fourth quarter. General merchandise exports are down 2.2 percent from the prior quarter, although within that grouping foods, feeds, and beverages are up 4.6 percent and industrial supplies are up 0.5 percent. Exports of nonmonetary gold are up 6.4 percent in dollar value. Exports of services are 2.8 percent higher to $287.1 billion and had gains in most categories. The largest categories in dollar value are other business services with a 1.5 percent rise, travel with a 4.1 percent increase, and financial services with a 2.9 percent increase. Income receipts paid are up 4.8 percent in the fourth quarter to $417.5 billion, mostly on a 15.4 percent jump in direct investment income.

Imports of goods are up 0.7 percent in the fourth quarter to $845.3 billion. Goodes imports are higher mainly on a 2.8 percent increase in consumer goods except automotive and a 155.8 percent jump in imports of nonmonetary gold. Imports of services are up 2.3 percent to $211.0 billion. Imports of services were lower or gained only slightly in most categories in the third quarter. However, there is a sharp 7.3 percent increase in travel, a rise of 3.7 percent in transport, and an increase of 5.2 percent in insurance services. Income payments are down 0.2 percent to $471.4 billion. Primary income payments are 0.7 percent higher in the fourth quarter, but more than offset by a 2.9 percent decline in secondary income.

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)

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.