Arab Today, arab today us currentaccount gap widens
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Arab Today, arab today
Arab Today, arab today

US current-account gap widens

Arab Today, arab today

Arab Today, arab today US current-account gap widens

Washington - Arabstoday

The current-account deficit in the US widened in the first quarter to $137.3 billion (Dh504 billion), the biggest in three years. The gap, the broadest measure of international trade because it includes income payments and government transfers, grew 16 per cent from a revised $118.7 billion in the prior quarter, the US Commerce Department reported Thursday in Washington. The median forecast of economists in a Bloomberg News survey called for the deficit to widen to $131.9 billion. The European debt crisis may limit growth overseas more than it hurts the world’s largest economy, signaling the deficit may continue to climb as US exports cool faster than imports.A yawning imbalance is also a reminder the US remains dependent on foreign investors for funding. “We’re seeing a substantial disruption in Europe and the Asian economies,” Michael Englund, chief economist of Action Economics, said before the report. “Clearly there’s a slowing under way. Our balance has been steadily widening with China and OPEC.” Englund projected a gap of $137 billion. Estimates of the 37 economists in a Bloomberg survey ranged from deficits of $123.8 billion to $139.5 billion. The fourth quarter gap was revised down from a previously reported $124.1 billion. The shortfall last quarter was the biggest since the last three months of 2008. It was equivalent to 3.6 per cent of gross domestic product, up from 3.1 per cent the prior quarter. The deficit reached a record high of 6.5 per cent of GDP in the fourth quarter of 2005.Trade gap The trade deficit in goods and services, which accounts for most of the current-account gap, climbed to $151 billion from $146.3 billion in the fourth quarter, today’s report showed. The monthly trade gap narrowed to $50.1 billion in April, down 4.9 per cent from the prior month, the Commerce Department reported earlier this month. American exports to the European Union fell 11 per cent as a sovereign debt crisis pushed the region to the brink of recession. US income on overseas assets fell by $4.39 billion to $182.5 billion in the first quarter, Thursday’s report showed. Foreign earnings on US assets, including wages and compensation, increased by $7.91 billion to $134.9 billion. That left a $47.6 billion surplus on income payments, down from a $59.9 billion surplus in the prior quarter and the smallest in a year. US investments overseas generally yield more than the Treasury securities that foreign investors prefer to buy, helping maintain the income surplus. Government payments Payments by the US government to foreigners and other private transfers abroad exceeded inflows from overseas by $33.9 billion last quarter, compared with $32.2 billion in the last three months of 2011. Media and advertising company Interpublic Group of Companies has seen some clients trim spending in Europe, which accounts for 12 per cent of the company’s business, Chief Financial Officer Frank Mergenthaler said. Europe “is problematic,” Mergenthaler said at a June 13 conference. “I think you’re seeing multinational clients move money out of Europe to go to some of the high-growth markets and you see domestic clients just pulling back on spending.” from gulfnews.com

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