US Deficit up 8.5%; rising to 2008 levels

The US deficit in the current account rose 8.5% to $123.1 billion, the highest it has been for more than 8 years.

Latest figures release show that a fall in income receipts from foreigners have pushed the US deficit up to 2.6%, bringing it back towards the levels of 2008, but well short of the 2005 high of 6.3%.

According to the Department of Commerce, the increase in the account deficit during the second quarter rose from $113.5 billion to $123.1 billion and pushed the figure up to a level equivalent to 2.6% of the US’s total economy when measured against the GDP. This reflects an increase from the first quarter of this year, where the deficit measured 2.4%. The news came as a surprise to many who had pencilled in a deficit figure of $110 billion for the months ending in June.

The increase is largely being attributed to a $5.2 billion decrease in receipts of secondary income from foreigners alongside a decline in government fines and penalties.

Import of goods and services increased by $11.8 billion by the end of June, however these figures accelerated more quickly than sales to overseas markets which were up $2.2 billion, benefitting from a weaker dollar and an upturn in global growth.

The current account is widely viewed as the most accurate measure of US trade because it includes goods and services in addition to payments and investments from the rest of the world to America.

The government will be keen to try and reduce this deficit, given it was a significant campaign pledge from the current administration who have repeatedly claimed that it is reducing the number of jobs for Americans, particularly in factories across the country.