US deficit falls: Trade imbalance smallest since 2009

US deficit falls 11.6 percent in third quarter as exports rise. Although US deficit falls for the quarter, the annual current account deficit is expected to rise a modest 2 percent.

Benjamin Eye/Virgin America/PRNewsFoto/File
Virgin Group Founder Sir Richard Branson and Dallas Mayor Tom Leppert (right) hand out free airline tickets at the National Business Travel Convention in Houston last year. According to the latest government report on foreign trade, the US deficit falls to $110 billion in the third quarter, the smallest gap since the fourth quarter of 2009. One reason for the fall: stronger sales of airline tickets to foreigners.

The U.S. deficit in the broadest measure of foreign trade fell in the summer to the lowest level in nearly two years, reflecting stronger exports of commercial aircraft and other goods and a jump in the sales of services such as airline tickets to foreigners.

The Commerce Department said Thursday that the deficit in the current account dropped 11.6 percent to $110.3 billion, the lowest level since the final three months of 2009.

The current account is the broadest measure of American's financial dealings with the world. It covers not only trade in goods but also services, such as air travel, and investment flows among nations. Economists watch the current account as a sign of how much the United States needs to borrow from foreigners.

For the third quarter, the deficit in goods dropped 4.6 percent to $181.8 billion, reflecting a strong 2.6 percent rise in U.S. exports and a much smaller 0.2 percent increase in imports.

The U.S. surplus in services increased 4.1 percent to $46.2 billion with strength led by gains in airline ticket sales to foreigners. The surplus in income rose 2.5 percent to $58.3 billion in the third quarter. There was also a smaller deficit of $33 billion in unilateral transfers, the category that covers U.S. foreign aid.

Economists at JPMorgan Chase are forecasting that the account deficit will increase this year to $480.2 billion. That would be a modest 2 percent increase from last year's deficit.

The current account deficit hit an all-time high of $800.6 billion in 2006. It then shrank as the 2007-2009 recession reduced demand for imports. The gap began widening again after the recession ended.

The JPMorgan economists estimate that the account deficit will represent about 3.2 percent of the economy, the same as in 2010.

The U.S. economy struggled in the early part of the year from a spike in energy prices, supply disruptions caused by the Japanese earthquake and turbulent stock markets. Investors worried about how the European debt crisis would hurt the global economy.

The U.S. economy grew at a scant annual rate of 0.9 percent in the first half of the year. It was the slowest six-month stretch since the recession ended in 2009. But growth picked up to a 2 percent rate in the July-September quarter. Many economists say they think the economy will end the year with growth of around 3 percent.

Even with that rebound, growth would still not be strong enough to make a significant dent in the unemployment rate, which was 8.6 percent in November

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