By Edward Kean
Washington, June 21 (BridgeNews) - Paced by a sharp decline in imports, the U.S. current account deficit narrowed to a seasonally adjusted $109.6 billion in the first quarter from the record fourth-quarter gap of $116.3 billion, the Commerce Department said Thursday. It was the first quarterly drop in the deficit since 1997, a Commerce spokesman said.
Commerce revised the current account deficit for the fourth quarter from the previously reported record of $115.3 billion.
The narrower current account deficit comes at a time when U.S. economic growth has slowed sharply. Typically, import volumes slow when the economy cools.
The current account, the broadest measurement of U.S. worldwide transactions, comprises goods and services trade, investment income and foreign aid payments.
Until the first quarter, the current account gap had widened sharply over the last several years at a time of strong U.S. economic growth and weaker economic performance overseas. The widening current account gap has stirred some concern over whether foreigners will remain willing to invest in U.S.
financial assets. But the value of the dollar has remained strong despite the widening current account deficit as foreign individuals continue to find attractive investment opportunities in the U.S. Nonetheless, some Fed officials and private economists have expressed concern that the dollar may eventually fall due to the widening trade deficit, which could lead to higher inflation and higher interest rates.
TRADE STATISTICS
The U.S. goods trade deficit narrowed in the first quarter to $112.5 billion from $118.5 billion the previous quarter. Merchandise exports dipped to $194.9 billion from a revised $196.2 billion in the fourth quarter. Merchandise imports declined to $307.5 billion from a revised $314.8 billion in the October-December period. The services trade surplus also narrowed to $17.5 billion in the first quarter from a revised $18.2-billion in the fourth quarter.
FOREIGN TRANSACTIONS IN TREASURY SECURITIES, STOCKS
In a sign that foreigners remained eager to buy U.S. assets, net foreign purchases of U.S. stocks and bonds, excluding U.S. Treasury securities, increased to a record $147.1 billion in the first quarter, from a revised $126.6 billion in the prior quarter.
Despite broad declines in stock prices, net foreign purchases of U.S. stocks rose to $41.0 billion, from a revised $39.3 billion in the prior quarter, Commerce said in separate data on capital transactions that is not reflected in the current account.
Net foreign purchases of US corporate bonds and other non-Treasury bonds rose a record $106.1 billion, after a $87.4 billion rise in the fourth quarter.
The rise largely was due to increased purchases by Western European investors, Commerce said.
Private foreign investors were net buyers of Treasury securities. Net private foreign purchases of U.S. Treasury securities totaled $538 million billion compared with revised net sales of $10.4 billion in the fourth quarter.
Foreign central banks remained net sellers of US Treasury securities, disposing of $1.1 billion from January through March. In the fourth quarter, net sales by "foreign official institutions" were a revised $13.4 billion, Commerce stated.
Net financial inflows for foreign direct investment slowed sharply to $41.6 billion in the first quarter from $84.7 billion in the prior quarter, reflecting a drop in foreign purchases of U.S. companies.
OTHER DETAILS
Income on U.S. direct investment abroad fell to $38.3 billion from a revised $39.6 billion in the previous period. Receipts on U.S. portfolio investment abroad fell to $46.8 billion, from a revised $51.5 billion in the preceding quarter, Commerce said.
Foreign aid payments and government pensions sent abroad--also known as unilateral transfers--contributed $11.5 billion to the current account deficit, compared with a revised $16.7 billion in the fourth quarter.