* Current account deficit narrows to $107.5 billion
* Smallest shortfall since fourth quarter of 2010
* As share of GDP, gap down to 2.7 percent from 3.0 percent
WASHINGTON, Dec 18 The U.S. current account
deficit shrank to its narrowest in nearly two years in the third
quarter as weak domestic demand and lower oil prices curbed
imports, a government report showed on Tuesday.
The Commerce Department said the current account gap, which
measures the flow of goods, services and investments into and
out of the country, fell to $107.5 billion, the lowest level
since the fourth quarter of 2010, from $118.1 billion in the
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, if sustained, should help support the
dollar, even as the Federal Reserve continues its aggressive
easing policy to boost economic growth.
"With imports falling further in October, look for the
current account gap to decrease again in the fourth quarter,"
said Sal Guatieri, a senior economist at BMO Capital Markets in
"Next year, faster growth in emerging markets should support
exports, extending the improvement in the trade balance. A
gradually shrinking current account deficit means the U.S. is
becoming less dependent on foreign funding, which should be a
long-term positive for the greenback."
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 shrunk 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.
In the third quarter, the deficit on goods tumbled to $173.9
billion from $185.7 billion in the prior quarter, while the
services surplus rose to $49.4 billion from $48.3 billion.
The surplus on income decreased to $50.8 billion from $52.1
billion in the second quarter, putting a wrinkle on the report.
The drop reflected an increase in dividend payments abroad.
But foreign investment in the United States rebounded $282.0
billion after decreasing $143.6 billion in the second quarter.
There was also an increase in purchases of U.S. Treasuries and
shares during the quarter.
"The third quarter also saw a marked increase in investment
into U.S. currency and U.S. Treasury securities, likely a
function of the increased uncertainty seen in the markets during
the period," said TD Securities' Gennadiy Goldberg.