US current account deficit narrows in third quarter

[WASHINGTON] The US current account deficit fell to more than a one-year low in the third quarter as imports declined sharply and the surplus on primary income swelled, government data showed on Thursday.

The Commerce Department said the current account deficit, which measures the flow of goods, services and investments into and out of the country, decreased 0.9 per cent to US$124.1 billion last quarter, the lowest level since the second quarter of 2018.

Data for the second quarter was revised to show the deficit declining to US$125.2 billion, instead of the previously reported US$128.2 billion.

Economists polled by Reuters had forecast the current account deficit would tighten to US$122.1 billion in the third quarter.

The current account gap represented 2.3 per cent of gross domestic product in the July-September quarter. That was down from 2.4 per cent in the second quarter. The deficit on the current account has tumbled from a peak of 6.3 per cent of gross domestic product (GDP) in the fourth quarter of 2005.

The United States is now a net exporter of crude and fuel on a quarterly basis, helping to curb the import bill. It is set to achieve that coveted status for the first time on record on an annual basis in 2020, the US Energy Information Administration (EIA) said last week, the result of a production surge that has dramatically reduced the nation's dependence on foreign oil.

Goods exports decreased US$0.9 billion to US$413.8 billion in the third quarter. Goods imports fell US$4.5 billion to US$633.4 billion.

The Trump administration's "America First" policy, which has left Washington embroiled in a 17-month trade war with China as well as tit-for-tat tariffs with other trading partners, has reduced trade flows, resulting in a narrowing of the trade deficit.

The surplus on primary income - which includes investment income such as dividends and employee compensation - rose to US$68.7 billion from US$66.6 billion in the second quarter. Primary income receipts fell US$4.1 billion to US$282.0 billion, reflecting decreases in direct investment income and other investment income

The deficit on secondary income, which includes US government grants, pensions, fines and penalties, and worker remittances, increased to $35.5 billion from US$32.7 billion.

Dividends increased US$24.9 billion to US$95.3 billion in the third quarter, remaining elevated since last year's overhaul of the tax code, which slashed the corporate tax rate to 21 per cent from 35 per cent and generally eliminated taxes on repatriated earnings.

REUTERS