The U.S. budget deficit so far this fiscal year was the smallest since 2008 as a stronger economy bolstered tax payments by consumers and businesses, a government report showed.
The $365.9 billion shortfall from October through June compared with a $509.8 billion gap in the same period a year earlier, the Treasury Department said in a report today in Washington. Last month, the government posted a $70.5 billion surplus compared with a $116.5 billion excess a year earlier, the report also showed.
Rising employment and corporate profits will probably keep lifting tax receipts this year as the U.S. recovers from a first-quarter slump. That will help shrink this fiscal year’s deficit, which is projected to be the smallest as a share of the economy since 2007.
“Deficits are rapidly declining,” Paul Edelstein, director of U.S. financial economics at IHS Global Insight Inc. in Lexington, Massachusetts, said before the report. “A lot of it is coming on the revenue side, mostly from taxes -- there were increases in payroll taxes last year, which are still being felt this year, corporate profits are up and they are paying more in taxes.”
The median estimate in a Bloomberg survey of 20 economists projected the June surplus would come in at $76.5 billion. Estimates ranged from $23 billion to $136 billion. The Congressional Budget Office predicted revenue would top spending by $70 billion in June.
The deficit in fiscal 2014, which ends Sept. 30, is projected to be 2.8 percent of gross domestic product, according to CBO, compared with 4.1 percent in 2013.
Revenue over the first nine months of the fiscal year that began Oct. 1 rose 8.2 percent compared with a year earlier, while spending gained 1.1 percent, today’s report showed.
As demand improves, employers are taking in more workers. Payrolls grew by 288,000 in June, bringing the monthly average gain so far this year to almost 231,000. If that pace is sustained, job gains this year would be the best since 1999. The unemployment rate dropped last month to an almost six-year low of 6.1 percent.
Higher receipts from the Federal Reserve, resulting from stronger earnings on the central bank’s securities holdings, also contributed to the narrower deficit, the CBO said in a July 8 review of June budget. The Fed’s bond-purchase program has boosted its balance sheet to a record $4.38 trillion.
The federal government’s June surplus was lower than a year ago, when record income prompted Fannie Mae to boost dividends it payed to the Treasury. “Absent that payment, this June’s surplus would have been slightly larger than that in June 2013,” according to the CBO.