U.S. current account deficit narrows in third quarter

WASHINGTON (Reuters) - The U.S. current account deficit fell to more than a one-year low in the third quarter as imports declined sharply and the surplus on primary income swelled, government data showed on Thursday.

FILE PHOTO: Shipping containers are loaded onto a ship at Yusen Terminals (YTI) on Terminal Island at the Port of Los Angeles in Los Angeles, California, U.S., January 30, 2019. REUTERS/Mike Blake/File Photo

The Commerce Department said the current account deficit, which measures the flow of goods, services and investments into and out of the country, decreased 0.9% to $124.1 billion last quarter, the lowest level since the second quarter of 2018.

Data for the second quarter was revised to show the deficit declining to $125.2 billion, instead of the previously reported $128.2 billion.

Economists polled by Reuters had forecast the current account deficit would tighten to $122.1 billion in the third quarter.

The current account gap represented 2.3% of gross domestic product in the July-September quarter. That was down from 2.4% in the second quarter. The deficit on the current account has tumbled from a peak of 6.3% of GDP in the fourth quarter of 2005.

The United States is now a net exporter of crude and fuel on a quarterly basis, helping to curb the import bill. It is set to achieve that coveted status for the first time on record on an annual basis in 2020, the U.S. Energy Information Administration (EIA) said last week, the result of a production surge that has dramatically reduced the nation’s dependence on foreign oil.

Goods exports decreased $0.9 billion to $413.8 billion in the third quarter. Goods imports fell $4.5 billion to $633.4 billion.

The Trump administration’s “America First” policy, which has left Washington embroiled in a 17-month trade war with China as well as tit-for-tat tariffs with other trading partners, has reduced trade flows, resulting in a narrowing of the trade deficit.

The surplus on primary income - which includes investment income such as dividends and employee compensation - rose to $68.7 billion from $66.6 billion in the second quarter. Primary income receipts fell $4.1 billion to $282.0 billion, reflecting decreases in direct investment income and other investment income

The deficit on secondary income, which includes U.S. government grants, pensions, fines and penalties, and worker remittances, increased to $35.5 billion from $32.7 billion.

Dividends increased $24.9 billion to $95.3 billion in the third quarter, remaining elevated since last year’s overhaul of the tax code, which slashed the corporate tax rate to 21% from 35% and generally eliminated taxes on repatriated earnings.

Reporting by Lucia Mutikani Editing by Paul Simao