United States Current Account Balance: ‘uniti aedificamus’.

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Highlights
Hurricane receipts from foreign insurance companies for losses resulting from hurricanes Harvey, Irma, and Maria shaved $24.9 billion from the nation’s current account deficit to a much lower-than-expected $100.6 billion in the third quarter.

But the quarter also benefited from a $6.2 billion narrowing in the goods deficit to $195.3 billion which saw gains for capital goods exports and aircraft. Other details include a narrowing in the secondary income deficit on higher income from government fines and penalties and a widening in the primary income surplus on increases in portfolio investment income and in direct investment income.

As a percentage of GDP, the quarter’s current account deficit came in at 2.1 percent, well down from 2.6 percent in the prior quarter and the lowest rate since second-quarter 2014. This report of course is skewed by the hurricane effect but other details, especially the narrowing in the goods gap, are nevertheless positive.

Recent History Of This Indicator
Benefiting from higher exports and lower imports, the current account deficit is expected to narrow sharply in the third quarter, to $116.7 billion from $123.1 billion in the second quarter. The account deficit relative to GDP has been moderate, at 2.6 percent in the second quarter.

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Heres Wells Fargo’s Global Economist Mr. Jay Bryson (Member of the Charlotte Economics Club and a really nice guy).

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Current Account Balance (U.S. International Transactions)

Market Sensitivity: Low to medium.

What Is It: The broadest accounting of America’s trade and investment relationship with the rest of the world.

Most Recent News Release on the Internet: http://bea.gov/newsreleases/international/transactions/transnewsrelease.htm

Home Web Address: http://bea.gov

Release Time: 8:30 a.m. (ET); data is released two-and-a-half months after the reference quarter ends.

Frequency: Quarterly.

Source: Bureau of Economic Analysis, Commerce Department.

Revisions: Usually moderate. Annual benchmark changes are made in June.”

Bernard Baumohl. “The Secrets of Economic Indicators”

Market Impact
Bonds

There is little tradable value in the international transaction report. It is a quarterly indicator with a headline that carries few surprises for the fixed-income market because other, more timely monthly measures, such as international trade, have already told much of the story. Nor does the current account balance stand out as some sort of leading indicator. This report, however, does get a lot of attention from economists and policymakers in Washington because of concerns that mounting current accounts deficits could at some point jeopardize U.S. economic growth.

Stocks

This release has virtually no impact on equity prices.

Dollar

Traders in the foreign exchange markets look over the report. A deterioration in the U.S. current account balance will over time erode the value of the dollar. However, no one knows with any certainty when these burgeoning deficits will tip the greenback over the cliff. Conversely, if America’s trade balance reverses course and begins to move closer to surplus, it would be considered highly bullish for the U.S. currency, though much depends on what’s behind this improvement. If it’s the result of a deep recession in the U.S., with import demand plummeting, foreigners will likely shy away from the dollar. If current account deficits were to narrow as a result of greater international demand for U.S. goods and services, the dollar should appreciate in value in the currency markets.

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  • R.W.N II

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