Current Account Gap Shrinks

From CNN Money

Fourth-quarter deficit narrows more than expected on lower oil prices and higher exports, Commerce Department report says.
March 14 2007: 8:53 AM EDT

WASHINGTON (Reuters) -- The U.S. current account deficit shrank more than expected in the fourth quarter of 2006 to $195.8 billion, as lower oil prices took a bite out of imports and U.S. exports continued to rise, a Commerce Department report showed Wednesday.

The quarterly shortfall was well below the midpoint estimate of $204 billion made by Wall Street analysts surveyed before the report. It was also the smallest since the third quarter of 2005, when it totaled $183.4 billion.

The fourth-quarter gap equaled 5.8 percent of U.S. gross domestic product, down from 6.9 percent in the third quarter and the record of 7 percent set in the fourth quarter of 2005.

The Commerce Department raised its estimate of the third-quarter gap to $229.4 billion from $225.6 billion previously.

The annual current account gap rose to $856.7 billion for 2006, from $791.5 billion in 2005. The 2006 shortfall equaled a record 6.5 percent of GDP versus 6.4 percent in 2005.

The current account, the broadest measure of U.S. trade with the rest of the world, includes trade in goods, services and investment flows. The huge U.S. current account deficit is viewed as one the major risks to the world economy.

U.S. goods imports in the fourth quarter decreased to $464.6 billion, from $480.2 billion in the third quarter, driven by a large drop in the value of oil imports as prices tumbled from highs set earlier in the year.

Oil prices also affect the revenue of companies such as Exxon Mobil (Charts), ConocoPhillips (Charts) and Chevron (Charts).

U.S. goods exports increased to $266.6 billion, from $261.3 billion. Exports of capital goods, particularly civilian aircraft from Boeing (Charts), helped fuel the increase. Consumer goods exports also were higher.

On the capital account side, U.S. investors purchased a record $115.7 billion of foreign securities in the fourth quarter, up from $54.4 billion in the third quarter.


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