U.S. Current Account Deficit Is Record

By John S. McClenahen Contrary to what economists generally expected, the deficit in the U.S. current account, the broadest measure of America's international economic position, shrank in the final quarter of last year. The deficit for the year, nevertheless, was a record. The current account deficit decreased to $127.5 billion in the fourth quarter of 2003, nearly $8 billion smaller than the revised third-quarter deficit of $135.3 billion, the U.S. Commerce Department reported on March 12. "The current account deficit narrowed despite a wider trade gap as investment flows improved," explains UBS Investment Research, New York. "Very likely, the [U.S.] dollar's sharp decline in [2003's fourth quarter] increased the value of profits returned to the U.S. [And] stronger growth abroad also likely boosted profits returned to the U.S." For full-year 2003, the current account deficit was $541.8 billion, a record and nearly $61 billion more than the $480.9 billion deficit in 2002. The Commerce Department also reported on March 12 that at the end of January 2004 business inventories in the U.S. totaled $1.194 trillion, up 0.1% from December 2003's month-end figure. The January increase was less than the 0.3% rise economists generally expected. "The slow pace of inventory building is a negative for [2004 first-quarter] GDP growth but could give latitude for stronger growth later this year," says UBS.

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