U.S. Current Account Deficit Hits 14-year Low

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Current Account
Ben Margot/AP
By Lucia Mutikani

WASHINGTON -- The U.S. current account deficit tumbled to a 14-year low in the fourth quarter as exports touched a record high, a government report showed Wednesday.

The Commerce Department said the current account gap, which measures the flow of goods, services and investments into and out of the country, narrowed to $81.1 billion.

That was the smallest since the third quarter of 1999 and followed a revised $96.4 billion gap in the third quarter.

It represented 1.9 percent of gross domestic product, the smallest share since the third quarter of 1997. That was down from 2.3 percent in the July-September period.

Economists polled by Reuters had forecast the current account deficit narrowing to $88 billion in the final three months of 2013 from a previously reported $94.84 billion in the prior period.

For all of 2013, the current account deficit averaged 2.3 percent of GDP, %VIRTUAL-article-sponsoredlinks%the smallest since 1997.

Economists expect the deficit to narrow further as an inventory correction weighs on imports. A decline in petroleum imports as the United States ramps up domestic production is also seen helping the current account.

The shortfall on the current account has shrunk from a peak of 6.2 percent of GDP in the fourth quarter of 2005, in part because of a significant increase in the volume of oil exports.

In the fourth quarter, exports of goods and services rose 2.5 percent to $785.2 billion, while imports rose only 0.7 percent.

The surplus on income rose to $64.4 billion from $59.1 billion in the third quarter. Net unilateral transfers fell to $31.6 billion from $34 billion.

9 Numbers That'll Tell You How the Economy's Really Doing
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U.S. Current Account Deficit Hits 14-year Low
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
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