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Current-Account Deficit in U.S. Narrowed 1.8% in Fourth Quarter

The current-account deficit in the U.S. unexpectedly narrowed in the fourth quarter, helped by a the biggest surplus on income in a year.

The gap, the broadest measure of international trade because it includes income payments and government transfers, shrank 1.8 percent to $110.4 billion from a revised $112.4 billion shortfall in the prior quarter, a Commerce Department report showed today in Washington. The median forecast of economists in a Bloomberg survey called for a $112.5 billion deficit in the final three months of 2012.

Stable growth in overseas markets would help underpin demand for U.S.-made goods, keeping the current account gap from ballooning as sustained spending in the U.S. drives import growth. The figures underscore the dependence of the world’s largest economy on foreign investors for funding.

“The current account deficit has held fairly steady,” Gennadiy Goldberg, a U.S. strategist at TD Securities Inc. in New York, said before the report. TD Securities was the top forecaster of the current account in the past two years, according to data compiled by Bloomberg. “The trend has recently started to move toward slightly wider current accounts, which does show normalization going on in the market.”

For all of 2012, the current-account gap expanded 1.9 percent to $475 billion, the widest in four years, today’s figures showed.

Estimates of 40 economists in the Bloomberg survey ranged from fourth-quarter deficits of $108.3 billion to $120 billion. The third-quarter shortfall was revised from an initially reported $107.5 billion.

The gap represented 2.8 percent of gross domestic product last quarter, the same as in the prior quarter. The deficit reached a record high of 6.5 percent of GDP in the fourth quarter of 2005.

Trade Deficit

The trade deficit in goods and services, which accounts for most of the current-account gap, widened to $128.4 billion, from $124.8 billion in the prior three months, today’s report showed.

After adjusting for the influence of prices, the trade gap climbed to $48 billion in January from $44.2 billion in December, Commerce Department data showed March 7. The January level was little changed from the fourth-quarter average, indicating trade so far is having little influence on growth estimates.

Stability in the global growth outlook, which supports stronger exports, may bolster earnings at companies including Moline, Illinois-based Deere & Co., the largest agricultural- equipment maker in the world. Deere in February raised its annual profit estimate and said equipment sales will rise about 6 percent, more than its prior prediction.

‘Good Shape’

“Our key markets remain in good shape,” Susan Karlix, manager of investor communications, said during an earnings teleconference on Feb. 13. “Current government programs in Brazil support higher amounts of equipment sales,” and in China, agriculture “subsidies are expected be higher and very supportive of equipment sales.”

Today’s report showed U.S. income on overseas assets increased by $8.1 billion to $190.9 billion in the fourth quarter. Foreign earnings on U.S. assets, including wages and compensation, grew by $2.3 billion to $138.5 billion.

That left a $52.4 billion surplus on income payments from $46.6 billion in the prior quarter. U.S. investments overseas generally yield more than the Treasury securities that foreign investors prefer to buy, helping maintain the income surplus.

Payments by the U.S. government to foreigners and other private transfers abroad exceeded official inflows from overseas by $34.4 billion last quarter, compared with $32.8 billion in the previous period.

The Commerce Department also said today that on March 26, it will begin publishing international investment positions data on a quarterly basis. Previously, the agency produced only annual statistics on the comparison between the value of American investments abroad and foreign investments in the U.S.

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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