The all-important U.S. current account deficit narrowed by $8.0 billion, or 5.9 percent, to $128.2 billion…
The all-important U.S. current account deficit narrowed by $8.0 billion, or 5.9 percent, to $128.2 billion in the second quarter of 2019, according to statistics from the U.S. Bureau of Economic Analysis (BEA).
Closely watched by economists, the current account deficit reflects the combined balances on trade in goods and services and income flows between U.S. residents and residents of other countries.
The revised first quarter deficit was $136.2 billion. The second quarter deficit was 2.4 percent of current dollar gross domestic product, down from 2.6 percent in the first quarter.
The $8 billion narrowing of the current account deficit in the second quarter mainly reflected an expanded surplus on primary income.
Exports of goods decreased $4.5 billion, to $414.6 billion, mainly reflecting a decrease in capital goods, mostly civilian aircraft. Imports of goods increased $2.0 billion, to $637.9 billion, led by an increase in industrial supplies and materials. Changes in the other major categories were nearly offsetting.
Trade in Services
Exports of services decreased $0.1 billion, to $207.8 billion, reflecting nearly offsetting changes across major categories.
Decreases were led by travel, mainly other personal travel, and increases were led by other business services, mainly professional and management consulting services.
Imports of services increased $0.2 billion, to $147.8 billion, also reflecting nearly offsetting changes across major categories.
Increases were led by insurance services, mainly reinsurance, and decreases were led by transport, mostly sea freight transport.
Receipts of primary income increased $7.1 billion, to $285.2 billion, mostly reflecting increases in portfolio investment income, mainly dividends on equity securities, and in direct investment income.
Within direct investment income, dividends were $88.3 billion in the second quarter and remain elevated since the passage of the 2017 Tax Cuts and Jobs Act, which generally eliminated taxes on repatriated earnings beginning in 2018.
Receipts of secondary income decreased $0.3 billion, to $35.5 billion. Payments of secondary income decreased $4.5 billion, to $67.9 billion, mostly reflecting decreases in U.S. government grants and in private sector payments of fines and penalties.
Financial Account Transactions
Net financial account transactions were $155.1 billion in the second quarter, reflecting net U.S. borrowing from foreign residents.
Second quarter transactions increased U.S. residents’ foreign financial assets by $208.2 billion. Transactions increased direct investment assets, primarily equity, by $86.0 billion; portfolio investment assets, mainly long-term debt securities, by $38.2 billion; other investment assets, primarily currency and deposits, by $81.6 billion; and reserve assets by $2.4 billion.
Second quarter transactions increased U.S. liabilities to foreign residents by $354.1 billion. Transactions increased direct investment liabilities, mostly equity, by $81.2 billion; portfolio investment liabilities, both equity and debt securities, by $167.5 billion; and other investment liabilities, mostly bank deposits, by $105.5 billion.
Net transactions in financial derivatives were $9.2 billion in the second quarter, reflecting net borrowing from foreign residents.