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U.S. current account deficit widens to 14-year high in second quarter By Reuters


© Reuters. FILEPHOTO: Shoppers shop in Macy’s departmental inside Roosevelt Field mall, Garden City. New York. U.S.A, May 20, 2021. REUTERS/Shannon Stapleton/File Photo

WASHINGTON (Reuters) – The U.S. current account deficit increased to a 14-year high in the second quarter as businesses boosted imports to replenish depleted inventories amid robust consumer spending.

According to the Commerce Department, the current account deficit measures flow of goods and services into and out the country and rose 0.5% last quarter, reaching $190.3 billion. This was the biggest shortfall since 2007.

According to revised data, the gap in the first quarter of 2007 was $189.4 billion instead of $195.7 trillion as reported previously.

Last quarter, the current account deficit was 3.3% of gross national product. This was down from the 3.4% recorded in January-March. Still, the deficit remains below a peak of 6.3% of GDP in the fourth quarter of 2005 as the United States is now a net exporter of and fuel.

Due to the status of the US dollar as the reserve currency, the wider deficit will not be an issue. As the country leads the recovery of the COVID-19 epidemic, the current account gap may continue to be large.

2.6% growth rate was recorded in the second quarter. The increase in GDP was driven by an additional quarter of double-digit increases in consumer spending. The imports partially satisfy domestic demand that has been buoyed through fiscal stimulus and vaccines against coronavirus.

In the first half, inventories were reduced.

In the first half of 2018, imports rose $29.0 to $706.3 trillion. The main reason for this was an increase industrial supplies and material, including petroleum products, as well as non-metallic and metal products.

Industrial supplies and petroleum products were the main drivers of an increase in exports, which rose by $28.3 billion or $436.6 billion. Also, exports of capital goods grew, especially in the case of semiconductors and civilian aircraft.

Services imports increased by $9.1billion to $127.8billion, primarily due to the increase in passenger and sea transport.

The exports of services grew $7.6 to $189.1billion. These numbers were driven by personal travel.

The primary income received rose $7.7 billion to $270.6 million. Primary income payments rose by $8.8billion to $221.5billion These increases were largely due to advances in direct investment income.

Receptions from secondary income fell $0.9billion to $41.6billion due to a decline in general government transfer, mainly penalties and fines. General government transfers fell, and secondary income payments dropped $3.5B to $72.6B.

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