BUSINESS

US current account trade deficit grew to $137.3 billion in first quarter, largest since 2008

06/14/2012 08:45 EDT | Updated 08/14/2012 05:12 EDT
WASHINGTON - The U.S. current account trade deficit grew this winter to its widest imbalance in three years. A big increase in imports of oil, cars and machinery and a drop in U.S. earnings on overseas investments drove the increase.

The deficit in the current account jumped 15.7 per cent to $137.3 billion in the January-March quarter. That's up from $118.7 billion in the final three months of last year, the Commerce Department reported Thursday.

The current account is the broadest measure of trade. It tracks the sale of merchandise and services between nations as well as investment flows.

U.S. exports of goods increased 1.6 per cent to $388.5 billion. But imports rose a larger 2 per cent to $583 billion.

America's surplus in services, things such as airline tickets and financial services, increased slightly to $43.5 billion but the U.S. surplus in investment income declined by $12.3 billion to $47.6 billion. This change reflected lower payments to Americans on their overseas investments and higher payments to foreigners on their U.S. investments.

Economists watch the current account as sign of how much the United States needs to borrow from foreigners. The deficit in the first quarter totalled 3.6 per cent of the overall U.S. economy, up from 3.1 per cent in the fourth quarter. However, it was still well below the all-time high of a deficit that was 6.5 per cent of the total economy in the final three months of 2005.

The deficit rose to a revised $465.9 billion last year, up 5.4 per cent from 2010 and the largest imbalance since 2008.

Economists think the deficit will keep rising in 2012. Europe's debt crisis has pushed many countries in that region into recession, meaning they will be buying fewer U.S. exports. In addition, some of America's other major export markets, such as China, are seeing slower growth. That will likely cut into U.S. export sales.

The current account deficit hit an all-time high of $800.6 billion in 2006. It then shrank after a deep recession reduced demand for imports. The gap began widening again after the recession ended in June 2009.

The economy grew at an anemic rate of 1.7 per cent in 2011. Economists had hoped growth would improve this year but they have been marking down their forecasts recently after a string of disappointing reports have indicated that job growth and consumer spending have slowed.