United States current account deficit in the fourth quarter of 2006 fell to its smallest in more than a year helped by lower oil prices and a steady rise in U.S. exports, according to a Commerce Department report released Wednesday.
The quarterly shortfall totalled 195.8 billion US dollars and was the smallest since the third quarter of 2005, when it was 183.4 billion. However the gap still set an annual record in 2006 of 856.7 billion, up more than 8% from 2005. This also represented a record as a percentage of the overall U.S. economy, GDP, at 6.5% up from 6.4% in 2005. The current account is the broadest measure of a country's trade with the rest of the world and includes goods, services, and capital and financial flows, such as foreign purchases of U.S. Treasury bonds to help fund the U.S. government's budget deficit. Dan Griswold, director of the Cato Institute's trade policy centre said the current account deficit reflected strong U.S. consumer and business demand and the active interest of foreigners in investing in the United States. "If the expanding current account is a drag on growth, somebody forgot to tell the U.S. economy" Griswold said. "Growing levels of trade and foreign investment have boosted U.S. growth, job creation and rising real wages." The fourth-quarter gap fell to 5.8% of U.S. GDP, from 6.9% in the third quarter and a record 7% in the fourth quarter of 2005. U.S. goods imports in the fourth quarter decreased to 464.6 billion US dollars, from 480.2 billion in the third quarter, as average oil prices tumbled from a record 66 US dollars per barrel in August to the low fifties by the end of year. U.S. goods exports increased to 266.6 billion, from 261.3 billion. Exports of civilian aircraft and other capital goods led the increase, followed by consumer goods. U.S. investors made net purchases of a record 115.7 billion of foreign securities in the fourth quarter, up from 54.4 billion in the third quarter.