Broadest US trade deficit fell in Q2 to $117.4B

Associated Press Modified: September 18, 2012 at 9:00 am •  Published: September 18, 2012
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WASHINGTON (AP) — The U.S. current account trade deficit narrowed in the April-June period, pushed lower by an increase in American exports and cheaper oil imports.

The Commerce Department said Tuesday that the deficit in the current account decreased 12.1 percent to $117.4 billion in the second quarter. That's down from a deficit of $133.6 billion in the January-March quarter, which had been the largest in three years.

The current account is the broadest measure of trade. It tracks the sale of merchandise and services between nations as well as investment flows. Economists watch the current account as a sign of how much the United States needs to borrow from foreigners.

Many economists predict it will widen again in coming quarters. A global slowdown has dampened demand of for U.S. exports. And oil prices are rising again, in part because of increased Middle East tensions.

Europe's debt crisis has pushed much of the region into recession. The region accounts for about one-fifth of U.S. export sales. And other major export markets, including China, India and Brazil, have experienced slower growth.

The current account deficit hit an all-time high of $800.6 billion in 2006. It then shrank after a deep recession reduced U.S. demand for foreign goods by a greater amount than U.S. export sales were dampened. The trade gap began widening again after the recession ended in June 2009.

The economy grew at an anemic annual rate of 1.7 percent in the April-June quarter and job growth has been disappointing.

The Federal Reserve last week said it will purchase an average of $40 billion a month in mortgage-backed securities until the economy shows significant improvement. The goal of the program is to lower long-term interest rates and encourage more borrowing and spending. The Fed also said it plans to keep its benchmark short-term interest rate near zero until mid-2015.

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