Trade Deficit Hits Record

Washington, DC, December 18, 2006--The Commerce Department reported Monday that the current account trade deficit increased 3.9 percent to a record $225.6 billion in the July-September quarter. That represented 6.8 percent of the country's total economy, up from 6.6 percent of the gross domestic product in the spring quarter. The current account is the broadest measure of U.S. trade because it tracks not only the flow of goods and services across borders but also investment flows. The figure is closely watched by economists because it represents the amount of money the country must borrow from foreigners to make up the difference between what America imports and what it sells overseas. The current account deficit is expected to hit a new record for the full year, far surpassing last year's $791.5 billion imbalance even though the shortfall for the fourth quarter is likely to show an improvement, reflecting the drop in oil prices after hitting records this summer. The $225.6 billion deficit was in line with economists' expectations. It followed a $217.1 billion shortfall in the April-June quarter and topped the previous record of $223.1 billion in the final three months of last year. The increase in the shortfall last quarter was led by an $8.1 billion rise in the deficit in goods, which was driven higher by surging global oil prices. America's surplus in services, which includes such things as airline tickets, banking services and consultants' fees, rose by $810 million to $18.3 billion. The deficit in investment flows — meaning that the United States is now having to pay foreigners more than Americans' earn on their overseas investments — rose by $1.6 billion to an all-time high of $3.8 billion. Economists expect that figure to climb even higher in coming years representing the growing size of U.S. assets now in the hands of foreigners, reflecting all of the trade deficits run up over the past three decades.