Wednesday, September 19, 2012
U.S. current-account deficit falls by 12 percent
The amount of the U.S. "current-account" deficit fell by 12 percent in the second quarter on lower oil imports and higher income transfers, such as U.S. earnings on investments overseas.
The nation's current-account balance fell to $117.4 billion in the second quarter from a downwardly revised $133.6 billion in the first quarter, the Commerce Department said Tuesday.
The current account primarily measures whether a nation is selling more goods and services to other countries than it buys from them. It also includes selective large money flows in and out of the country.
The U.S. again purchased more goods and services from foreign nations, but even so the deficit in goods fell to $185.8 billion from $194.3 billion in the first quarter. The U.S. imported less oil.
In services, the U.S. ran another surplus of $46.5 billion, up from $45.9 billion in the first quarter. Services include financial advice and Hollywood movies, areas in which the U.S. leads globally.
When a nation runs a current-account deficit, it has to borrow more money from overseas or sell off more domestic assets. But the declining deficit in the second quarter reflected a reduction in the balance of payments in several key areas.
Large current-account deficits tend to spark trade conflicts and may lead to trade wars. The large size of the U.S. current-account deficit has been a factor in the 2012 presidential election, with Republican contender Romney vowing to get tougher on China relative to its manipulative trade practices. Obama's administration has filed several suits about China dumping below-cost goods in the U.S., but is treading cautiously due to our slow growing economy, fearing a trade war that would do damage to American interests.
In the second quarter, the current-account deficit fell to 3.0 percent of U.S. gross domestic product from 3.5 percent. The deficit is down sharply from the highest point of 6.5 percent of GDP in the fourth quarter of 2005, but up from a low of 2.4 percent in the second quarter of 2009.
U.S.-owned assets in other countries, meanwhile, fell by $206.8 billion in the second quarter, following a $106.5 billion decline in the first quarter. The decline in U.S.-owned assets overseas is due to the deteriorating economic conditions in Europe and elsewhere.
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