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U.S. Account Deficit Improves in Q1 to -$104.2 Billion

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Friday, June 19, 2020

The U.S. Current Account Deficit for Q1 was released this morning, demonstrating a gradual but consistent improvement: -$104.2 billion, representing a narrowing of $100 million in the quarter. It is also lower than the $110 billion analysts were expecting. The improvement can be seen in a reduced deficit on goods, partly offset by reduced surplus in Americans’ primary income and expanded deficits in secondary income, as per Trading Economics.

For a bit of historical perspective, the U.S. balance was kept at zero until the 1970s, but showed signs of dipping in the 80s and 90s, and fell sharply after the millennium, and have largely remained at these 12-figure numbers, with a bottoming-out in the mid-2000s at sub-$200 billion. The only snap-back in recent years was during the recovery efforts during the Great Recession. But the deficit threatened to slip toward those levels as recently as Q4 2018.

We have seen our deficit come down steadily over the past 4 quarters, with -$128.2 billion posted in Q2 2019. However, with liquidity initiatives from the Federal Reserve combatting the pandemic’s effects on the U.S. economy, it wouldn’t be unwise to look for a new trajectory regarding deficits for Q2 2020 and beyond.

After the opening bell today, we will hear from Fed members Eric Rosengren (Boston), Fed Vice Chair Randal Quarles and yet another public address from Fed Chair Jay Powell. Thus far, the Fed’s stance on the overall economy is that digging out of the deep hole from the three-month economic shutdown will have long-lasting consequences. The Fed’s moves have been instrumental in providing slashed interest rates and loose lending policy that have helped provide fuel to the equities market.

Finally, today brings “quadruple witching” to the markets: the simultaneous expiration of single-stock options and futures, stock index options and stock futures all one the same day. Pre-market indexes are up, hopeful of a big upswing in buying activity. Quadruple witching periods usually demonstrate high trading volume, and often also bring about high volatility.

Mark Vickery
Senior Editor

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