MercoPress. South Atlantic News Agency

US current account deficit is 6.4% of GDP

United States current-account deficit, --the combined balances on trade in goods and services, income, and net unilateral current transfers--, increased to 804.9 billion US dollars in 2005 from 668.1 billion in 2004, equivalent to 6.4% of GDP.

According to the latest release from the Department of Commerce an increase in the deficit on goods to 781.6 billion from 665.4 billion accounted for most of the increase.

Other contributors to the increase in the deficit were a decrease in the surplus on income to 1.6 billion from 30.4 billion and a small increase in net outflows (payments) for unilateral current transfers to 82.9 billion from 80.9 billion.

In contrast, the surplus on services increased to 58.0 billion from 47.8 billion. As a share of U.S. GDP, the current-account deficit rose to 6.4% in 2005 from 5.7% in 2004.

The deficit on goods and services increased to 723.6 billion in 2005 from 617.6 billion in 2004, with the deficit on goods soaring to 781.6 billion in 2005 from 665.4 billion the previous year.

Goods exports expanded to 892.6 billion from 807.5 billion, with two thirds of the increase in capital goods and industrial supplies and materials. Goods imports increased to 1,674.3 billion from 1,472.9 billion, with over a third of the increase attributable to an increase in petroleum and petroleum products.

However the surplus on services increased to 58.0 billion in 2005 from 47.8 billion in 2004, with services exports reaching 379.6 billion from 343.9 billion.

Services imports increased to 321.6 billion from 296.1 billion with the largest increases were in "other" private services and in "other" transportation, such as freight and port services.

The growing imbalance of the US current account has once again triggered fears and pressure on China to cut its burgeoning trade surplus with the US. Many US politicians blame the growing trade deficit with China for broader economic problems, arguing that China has deliberately suppressed the value of its currency to sell goods abroad cheaply.

During a conference this week, US Commerce Secretary Carlos Gutierrez said that if China did not take action on currency reform it would encourage those in the US seeking to put up "protectionist barriers".

Support for legislation which would slap tariffs of more than 25% on certain Chinese goods if Beijing does not further revalue the yuan is thought to be gaining support among sections of Congress. Pressure is growing for China to act ahead of a visit by Chinese president Hu Jintao to the US next month.

"If our economic relationship is to stay afloat, China needs to lighten the load by carrying out reforms and delivering results" Mr Gutierrez told the audience.

However and in spite of the US showing a steady and healthy economic growth, market analysts also point out that the recurrent trade, federal budget and current account deficits are leading investors to try and limit their exposure to the United States and a drop in asset values.

Actually Federal Reserve chairman Ben Bernanke expressed concerns over the size of the US budget deficit in a recent hearing before Congress and in a letter sent to Senator Robert Menendez.

Widening the deficit would put future living standards at risk and as a result, "I think it would be very desirable to take concrete steps to lower the prospective path of the deficit" he said, adding that he was quite concerned "about the intermediate to long-term federal budget outlook".

White House forecasts that the US budget deficit will surge to a record 423 billion US dollars in 2006, up from 319 billion in 2005