Ahead of the Bell: US Current Account

US current account deficit likely fell to lowest level in more than 4 years at end of 2013

Associated Press
US current account deficit falls to 14-year low
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FILE - In this Wednesday, Oct. 23, 2013, file photo, container ships wait to be off loaded in a thick fog at the Port of Oakland in Oakland, Calif. The Commerce Department releases current account trade measure for the fourth quarter on Wednesday, March 19, 2014. (AP Photo/Ben Margot, File)

WASHINGTON (AP) -- The government reports on the U.S. current account trade deficit for the October-December quarter. The report will be released at 8:30 a.m. Eastern time Wednesday.

ANOTHER DROP: Economists forecast that the gap fell 7 percent in the fourth quarter to $88.2 billion, according to a survey by FactSet. That would be the lowest level since the second quarter of 2009, when the economy was still in recession.

The current account is the country's broadest measure of trade. It tracks not only the sale of goods and services but also investment flows.

NARROWING THE GAP: The U.S. current account deficit narrowed in the third quarter for the second straight time, as an increase in Americans' foreign investment earnings offset a larger trade deficit in goods.

Two trends have helped narrow the gap in the past several years. First, the U.S. has benefited from an oil and gas boom, mostly because new drilling technologies have made it feasible to drill for oil and gas in states such as North Dakota and Pennsylvania.

That's pushed down the trade deficit by boosting petroleum exports and lowering oil imports. The trade gap fell to a four-year low in November. It has widened slightly since then.

Secondly, low U.S. interest rates have reduced the payments foreigners have received on their holdings of U.S. Treasury bonds and other investments. Meanwhile, the payments that Americans receive on overseas investments have risen, boosting the nation's investment surplus. That trend could begin to reverse itself in the coming months, however, if interest rates rise.

A smaller trade deficit usually means that U.S. companies are producing more to meet domestic and overseas demand.

The monthly trade deficit, which covers merchandise and services, widened a bit in January, as Americans imported more food, machinery and petroleum.

The economy grew at a 2.4 percent annual pace in the final three months of last year, down from a healthy 4.1 percent rate in the July-September quarter.

Growth will likely weaken in the current January-March quarter, to about 2 percent, but most economists expect it will then pick up to a 3 percent pace for the rest of the year.

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