The US current account deficit expanded to $226.8 billion in the first quarter, according to data published by the Commerce Department’s Bureau of Economic Analysis on Wednesday. The outflow surpassed what economists had anticipated and represented an increase relative to the prior quarter.
The deficit widened by $5.8 billion, or 2.6%, from the fourth quarter. The government also revised the fourth-quarter shortfall to $221.1 billion from an earlier estimate of $190.7 billion, raising the baseline against which the first-quarter change is measured.
Economists surveyed ahead of the release had expected the first-quarter current account gap to be $215.0 billion.
Measured as a share of gross domestic product, the first-quarter deficit was 2.9% of GDP, up from 2.8% in the fourth quarter. For context within the data series, the deficit reached a peak of 6.3% of GDP in the third quarter of 2006.
Movement in the primary income balance was a notable factor behind the broader widening. Primary income swung to a deficit of $13.3 billion in the first quarter, reversing a surplus of $3.431 billion in the prior quarter. That shift worked in the opposite direction of an improvement in the trade balance.
The trade deficit for goods and services narrowed, falling to $165.8 billion in the first quarter from $177.3 billion in the fourth quarter, providing some offset to the overall widening of the current account shortfall.
On the receipts and payments side of primary income, receipts declined to $396.1 billion from $402.2 billion in the previous quarter. At the same time, primary income payments rose to a record $409.1 billion, up from $398.8 billion in the fourth quarter. Those payment dynamics contributed to the swing from a surplus to a deficit in the primary income component.
The published figures show a current account position that reflects both narrower net trade in goods and services and heavier net outflows on primary income. Revisions to earlier quarters and record-high primary income payments were central features of the reported change.
Key points
- The US current account deficit was $226.8 billion in Q1, up $5.8 billion (2.6%) from the prior quarter.
- The primary income balance moved to a $13.3 billion deficit from a $3.431 billion surplus, while primary income payments rose to a record $409.1 billion.
- The trade deficit narrowed to $165.8 billion from $177.3 billion, partially offsetting the overall widening.
Risks and uncertainties
- Data revisions can materially alter the reported path of the current account - the fourth-quarter deficit was revised upward to $221.1 billion from an earlier $190.7 billion.
- Elevated and record primary income payments introduce uncertainty for future net investment income flows and the overall external balance.
- If primary income receipts continue to decline while payments remain high, the current account deficit may persist or widen further.
These figures provide a snapshot of cross-border flows of goods, services and investment income for the quarter and underscore the role of income payments in shaping the current account outcome.