WASHINGTON, June 19 — The US current account deficit dipped to a near two-year low in the first quarter as the Covid-19 pandemic restricted the flow of goods and services.
The Commerce Department said today the current account deficit, which measures the flow of goods, services and investments into and out of the country, slipped 0.1 per cent to US$104.2 billion (RM445.6 billion), the smallest since the second quarter of 2018.
Data for the fourth quarter was revised to show the gap narrowing to US$104.3 billion, instead of US$109.8 billion as previously reported. Economists polled by Reuters had forecast the current account gap shrinking to US$103 billion in the January-March quarter.
The Commerce Department’s Bureau of Economic Analysis, which compiles the data attributed the drop “in part, due to the impact of Covid-19, as many businesses were operating at limited capacity or ceased operations completely, and the movement of travellers across borders was restricted.”
The Federal Reserve’s expansion of currency swap lines with more than a dozen foreign central banks to ease a global dollar crunch early in the crisis contributed to record increases in assets and liabilities in the US financial account.
The current account gap represented 1.9 per cent of gross domestic product in the first quarter, the smallest share since the third quarter of 2017.
Exports of goods and services and income received from foreign residents fell US$47.5 billion, the biggest drop in 11 years, to US$902.2 billion. That was the lowest level since the third quarter of 2017.
Imports of goods and services and income payments to foreign residents declined US$47.7 billion to US$1.01 trillion, also the lowest level since the third quarter of 2017. That drop was also the biggest since the first quarter of 2009.
The capital account deficit widened US$943 million to US$2.962 billion, the largest since the first quarter of 2015.
Despite the disruptions caused by the pandemic, American companies repatriated US$124.2 billion in profits in the first quarter, the most in over a year, up from US$83.6 billion in the prior period. An overhaul of the tax code slashed the corporate tax rate to 21 per cent from 35 per cent and generally eliminated taxes on repatriated earnings.
Even before the Covid-19 pandemic, the import bill had been shrinking because of the Trump administration’s trade war with China. The United States has also become a net exporter of crude and fuel, the result of a production surge that has dramatically reduced the nation’s dependence on foreign oil.
Investment income also took a hit last quarter as Covid-19 restrictions impacted earnings.
The surplus on primary income — which includes investment income such as dividends and employee compensation — dropped to US$52.5 billion, the smallest since the third quarter of 2016, from US$62 billion in the fourth quarter. Primary income receipts fell US$27.8 billion to US$255.1 billion.
The deficit on secondary income, which includes US government grants, pensions, fines and penalties, and worker remittances, increased US$1.1 billion to a record US$37.6 billion. — Reuters