The U.S. Treasury releases a monthly account of the surplus or deficit of the federal government. Changes in the budget balance of the annual fiscal year (which begins in October) are followed as an indicator of budgetary trends and the thrust of fiscal policy. Why Investors Care
| Released on 8/12/08 For Jul 2008 | ||||||||||||
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Highlights
The Treasury's budget deficit in July widened to $102.8 billion, above expectations of $97.0 billion and compared against a deficit of $36.4 billion in July last year. The year-ago comparison underscores the severe erosion underway in the nation's budget -- hit by lower receipts and rising outlays. Some of July's increase was tied to special factors including $14 billion in tax rebates with another $15 billion -- in an interesting factor -- for payments to cover deposits of failed financial institutions (FDIC). Another $6 billion went for the Iraq War.
Year-on-year, July receipts are down 5.8 percent with outlays up 27.2 percent. These rates far exceed the fiscal year-to-date rates, reflecting accelerating deterioration in the nation's budget (year-to-date receipts are down 1.0 percent with year-to-date outlays up 8.5 percent). Fiscal year-to-date, the Treasury's deficit is $371.3 billion vs. $157.4 billion this time last year. This report may not be surprising for the financial markets but it confirms the necessity of increased Treasury borrowing.
The U.S. Treasury monthly budget report showed a June surplus of $50.7 billion that was boosted by calendar quirks on government payments. The fiscal year-to-date tally tells the more meaningful story, at a deficit of $268.7 billion for a 122 percent increase from this time last year. Year-to-date, individual tax receipts are down 0.8 percent with corporate tax receipts down 15.4 percent. On the outlay side, defense spending is up 10.1 percent so far this fiscal year with social security and net interest payments showing mid single digit increases. Ahead, there's substantial risk that the nation's fiscal deficit will widen further as job contraction cuts back individual tax receipts which are the chief source of the government's income. This appears to be the case for July as the consensus expects a substantial widening in the deficit from prior July levels. The month of July typically shows a moderate deficit for the month. Over the past five years, the average deficit for the month of July has been $49.3 billion.
Treasury Statement Consensus Forecast for July 08: -$97.0 billion
Range: -$102.0 billion to -$59.0 billion.
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The federal budget balance is not seasonally adjusted. Consequently, it is useful to compare the current month's budget deficit or surplus to the same month for a couple of years. Some months are known to have large surpluses because quarterly estimated tax payments are received by the government. |
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