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US current account deficit increased 4.3% in second Q

Wednesday, September 17th 2008 - 21:00 UTC
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United States current account trade deficit increased by 4.3% to 183.1 billion US dollars in the second quarter of this year, up from 175.6 billion in the first quarter, the US Commerce Department reported Wednesday.

The current account is the broadest measure of US dealings with the rest of the world because it includes not only trade in merchandise and services but also investment flows. The deficit represents the amount of money the country is borrowing from foreigners. According to the Commerce Department imports of goods increased to 553.6 billion US dollars in the three months ending June 30, compared with 528.8 billion the previous quarter. Imports of petroleum and petroleum products accounted for nearly half the increase, the department said. Exports of goods rose to 337.3 billion, up from 317.8 billion. Industrial supplies and materials, including energy products, accounted for more than half the increase. Net financial inflows, acquisitions by foreigners of assets in the US minus acquisitions by US residents of assets abroad were 136.7 billion, down from 190.4 billion in the first quarter. US owned assets abroad fell by 110.4 billion, compared with an increase of 260.6 billion in the previous quarter. In other words US deficit on international trade in goods increased to 216.3 billion US dollars from 211 billion in the previous quarter, while surplus on income decreased to 27.3 billion from 33.2 billion, and Net unilateral current transfers to foreign residents were 29.9 billion, down from 31.7 billion. On the positive side, the surplus on international trade in services rose to 35.8 billion from 33.9 billion in the previous quarter The 183.1 billion US dollars is equivalent to 5.1% of GDP, down from 6.6% a year ago, but still unsustainable in the long term according to economists. In the second quarter the US dollar depreciated 2% against a basket of seven major world currencies. According to analysts reports China, energy and the ailing US automobile industry make up 90% of the US trade deficit. On the bright side earlier this week the US Department of Labor announced that US consumer prices in August fell for the first time in nearly two years as oil prices dropped sharply from record highs "in a sign that inflation may have peaked" The consumer price index fell last month by 0.1% after rising 0.8% in July on a monthly basis, in line with economists' forecasts, the first drop since October 2006. The report comes after data last week showed a sharp drop in producer prices and the cost of imports, led by falling energy costs, and is a boost for the US economy as it navigates the Energy prices slipped back by 3.1% in August after three months of sharp rises, the CPI showed, and gasoline prices fell by 4.2%. Core inflation, which excludes volatile food and energy prices, rose by 0.2%, less than the 0.3% increase in July but still close to recent trends. Year-on-year inflation was 2.5%, the same as in the previous month and above the Fed's preferred 2% upper boundary.

Categories: Economy, United States.

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