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US current account widens on weak exports, overseas profits

JUN 18, 20158:48 PM

[WASHINGTON] The US current account deficit widened in the first quarter to its highest level since 2012 likely due to the negative impact of a strong dollar on overseas profits and exports.

The Commerce Department said on Thursday the current account deficit, which measures the flow of goods, services and investments into and out of the country, increased 9.9 per cent to US$113.3 billion. That was the largest shortfall since the second quarter of 2012.

Economists polled by Reuters had forecast the deficit rising to US$117.0 billion. The government revised data going back to the first quarter of 1999.

The first-quarter current account deficit represented 2.6 per cent of gross domestic product, the highest since the third quarter of 2012, from 2.3 per cent in the fourth quarter.

Still, the deficit remained well below a record high of 6.3 per cent touched in the fourth quarter of 2005 as strong domestic energy production keeps the import bill in check.

The robust dollar has hurt the profits of multinational corporations and is also constraining export growth. The dollar gained about 4.5 per cent against the currencies of the United States' main trading partners in the first quarter.

Multinationals like Microsoft Corp, household products maker Procter & Gamble Co and healthcare conglomerate Johnson & Johnson have warned the dollar will hit sales and profits this year.

In the first quarter, direct investment income receipts from abroad fell US$9.1 billion to US$109.5 billion. Exports of goods fell 6.5 per cent to US$382.7 billion. That was the lowest level since the third quarter of 2011, likely reflecting the impact of labor disruptions at the West Coast ports.

REUTERS