The current account measures the United States' international trade balance in goods, services, and unilateral transfers on a quarterly basis. The levels of exports, imports and the current account indicate trends in foreign trade. Why Investors Care
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Highlights
The current account gap narrowed in the fourth quarter to $195.8 billion vs. $229.4 billion in the third quarter. The goods & services gap narrowed sharply to $178.6 billion vs. the third quarter's $201.4 billion. Another plus, private foreign investors were big purchasers of U.S. Treasuries in the quarter. More good news, the ratio between the current account deficit and GDP came back sharply to 5.8 percent from 6.9 percent in the third quarter.
Though the fourth quarter showed improvement, the nation's deficit is still enormous. The total current account gap for 2006 totaled $856.7 billion, well above the 2005 gap of $791.5 billion. But so far in the first quarter, both the Treasury deficit and the trade deficit show signs of narrowing. Markets showed no reaction to this morning's data.
The U.S. current account deficit widened to $225.6 billion in the third quarter from $217.1 billion in the second quarter, reflecting an oil-inflated widening in the trade gap. However, we should see improvement in the fourth quarter due to lower oil prices cutting back on the dollar volume of oil imports.
Current account Consensus Forecast for Q4 06: -$203.0 billion
Range: -$215.0 billion to -$198.0 billion
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