Current-Account Deficit in U.S. Widens 3.7% in First Quarter

The current-account deficit in the U.S. widened in the first quarter, aided by a jump in imports.

The gap, the broadest measure of international trade because it includes income payments and government transfers, widened 3.7 percent to $106.1 billion, from a revised $102.3 billion shortfall in the prior quarter that was less than initially reported, Commerce Department figures showed today in Washington. The median forecast of economists in a Bloomberg survey called for the deficit to expand to $111.3 billion.

Stabilization in overseas markets will underpin demand for U.S.-made goods and help to restrain the trade gap, which is the biggest part of the current account deficit. At the same time, the balance of payments shortfall is a reminder that the world’s largest economy remains dependent on foreign investors for funding.

“Growth in the U.S. remains fairly decent, and that will drive up imports,” Jay Bryson, global economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before the report. “U.S. exports will increase along with growth in the global economy. We’re going to see Europe improve slowly.”

Bloomberg Survey

Estimates (USCABAL) of 40 economists in the Bloomberg survey ranged from current account deficits of $105 billion to $122.4 billion. The fourth-quarter shortfall was revised from an initially reported $110.4 billion.

The gap represented 2.7 percent of gross domestic product last quarter, compared with 2.6 percent in the prior three months. The deficit reached a record high of 6.4 percent of GDP in the fourth quarter of 2005.

The trade deficit in goods and services, which accounts for most of the current-account gap, narrowed to $123.7 billion in the January through March period, from $127.4 billion in the fourth quarter, today’s report showed.

The trade deficit in the U.S. widened in April from a more than three-year low, reflecting a rebound in imports of consumer goods and business equipment that eased concern about the degree of slowing in economic growth. The gap grew by 8.5 percent to $40.3 billion from a $37.1 billion March shortfall, Commerce Department figures showed June 4.

Overseas Assets

Today’s report also showed U.S. income on overseas assets decreased to $192.9 billion in the first quarter, from $196.9 billion in the prior three months. Foreign earnings on U.S. assets, including wages and compensation, grew by $1.1 billion to $141 billion.

That left a $52 billion surplus on income payments, compared with $57 billion 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 $34.5 billion last quarter, compared with $31.9 billion in the previous period.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net Michelle Jamrisko in Washington at mjamrisko@bloomberg.net

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

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