U.S. current account deficit smallest in nearly two years

WASHINGTON Tue Dec 18, 2012 8:32am EST

WASHINGTON (Reuters) - The U.S. current account deficit fell more than expected in the third quarter and was its narrowest in nearly two years as the goods and services gap shrank, a government report showed on Tuesday.

The Commerce Department said the current account deficit, which measures the flow of goods, services and investments into and out of the country, fell to $107.5 billion, the lowest since the fourth quarter of 2010, from $118.1 billion in the second quarter.

That represented 2.7 percent of gross domestic product, the smallest share since the second quarter of 2009, and down from 3.0 percent in the second quarter.

The smaller deficit should be supportive of the dollar, even as the Federal Reserve continues its aggressive easing policy to boost economic growth.

Economists polled by Reuters expected the third-quarter current account gap to narrow to $103.4 billion from a previously reported $117.4 billion.

The shortfall on the current account has narrowed from a peak of 6.5 percent of GDP in the fourth quarter of 2005, in part because of a significant increase in the volume of oil exports, substantially cutting into the petroleum deficit.

In the third quarter, the deficit on goods and services tumbled to $124.5 billion from $137.4 billion in the prior quarter, the Commerce Department said. The surplus on income fell to $50.8 billion from $52.1 billion in the second quarter.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

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