Current account deficit rises to $109 billion
June 17, 2010 The Commerce Department said Thursday that the deficit in the
current account increased to $109 billion in the January-March
period, compared to a revised $100.9 billion in the fourth quarter
of last year.
The current account deficit narrowed to $378.4 billion in 2009,
down a sharp 43.4 percent from the 2008 deficit of $668.9 billion.
The big drop reflected a deep recession in the United States, which
cut demand for imported goods. But with the U.S. economy
recovering, analysts believe the trade deficit will increase this
year.
The 8 percent increase in the first quarter deficit marked the
third straight quarterly increase in the deficit, which now stands
at the highest point since the final three months of 2008.
The current account is the broadest measure of foreign trade
because it measures not only trade in goods and services, which are
tracked by the government on a monthly basis, but also investment
flows between countries.
The figure is watched closely by economists because it is a
measure of how much the United States must borrow from foreigners
to finance its balance of payments imbalance.
The 2009 deficit represented 2.7 percent of the total economy as
measured by the gross domestic product, the lowest level since
1998. The current account deficit hit a high of 6 percent of GDP in
2006.
That had raised concerns over whether foreigners would continue
to be willing to finance America's huge trade deficits. Now the
bigger concern is over foreigners' willingness to purchase U.S.
Treasury securities to finance America's soaring federal budget
deficits.
For the first quarter, the deficit in goods and services
increased by $10.5 billion to $115.3 billion, reflecting
higher-priced oil imports and increased imports of manufactured
goods.
Offsetting this increase slightly was a rise in income earnings
of $6.6 million to $41.7 billion. However, unilateral transfers,
which include foreign aid, rose by $4.2 billion to $35.5 billion.
Economists believe that the current account deficit will
continue to widen this year but will not climb to the previous
record levels.
But there is some concern that the trade deficit could widen
further than currently expected if the European debt crisis
worsens, depressing economic activity more in a key U.S. export
market.
For the moment, America's big exporting companies are optimistic
that strength in other parts of the world such as Asia will be able
to offset some of the weakness in Europe.
Caterpillar Inc., the world's largest maker of construction and
mining equipment, announced earlier this month that it was boosting
the company's quarterly dividend by 5 percent, reflecting in part a
brighter outlook for its sales because of the global economic
recovery.
The company said it had ramped up production to meet higher
demand for its heavy equipment, especially in developing countries.