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US Current Account Deficit Rises to $100b

US Current Account Deficit Rises to $100bUS Current Account Deficit Rises to $100b

The US current account trade deficit widened slightly in the July-September quarter, largely due to foreign institutions paying less in fines and penalties to the US government.

The Commerce Department said Wednesday that the deficit in the current account rose to $100.3 billion in the third quarter, up 1.9 percent from a revised $98.4 billion deficit in the April-June period, AP reported.

The increase occurred despite a drop in the trade deficit for goods and services, reflecting cheaper oil prices and a stronger dollar.

The deficit widened because fines collected by the US government from foreign institutions fell to $27.8 billion from $40.1 billion in the previous quarter, a 31 percent decrease. In the April-June period, the government had fined the French bank BNP Paribas $9 billion for violating sanctions against Sudan and Cuba.

The current account is the broadest measure of trade, covering not only the flow of goods and services but also investment flows. It faces downward pressure because the dollar has increased in value relative to other currencies and oil prices have fallen by almost 50 percent since June.

  Fall in Oil

The average price of a barrel of oil has dropped below $56 from a summer high of $107. That reflects weakening global demand as Japan has tumbled into a recession, Europe staves off a slowdown, China’s economy loses momentum and Russia copes with its collapsing currency. But US consumers have largely been insulated from these pressures and benefited from less expensive oil.

At the same time, the global slowdown has caused more investors to crowd into the dollar as a relative safe haven. The dollar appreciated 7.1 percent against other major currencies during the July-September quarter.

The current account is still relatively low by historical standards. The quarterly deficits regularly topped $150 billion in the four years before the Great Recession of 2007-2009.

Plunging gasoline costs pulled US consumer prices lower in November, muting inflation across the entire economy.

The Labor Department said Wednesday the inflation reading fell a seasonally-adjusted 0.3 percent last month, after prices were flat in October. Gas costs plummeted 10.5 percent in November, the steepest decline in nearly six years.

Core inflation, which excludes volatile energy and food prices, rose 0.1 percent in November. For the past 12 months, overall inflation has risen 1.3 percent while core inflation has increased 1.7 percent.

 

Financialtribune.com