U.S. Current Account Deficit Narrowed Again in Q4 but Set New Record for 2022
by:Sandy Batten
|in:Economy in Brief
Summary
- Q4 deficit was smallest in six quarters.
- Goods deficit widened in Q4 as both exports and imports fell.
- Services surplus widened and deficit on secondary income narrowed in Q4.
The U.S. current account deficit narrowed more than expected in the fourth quarter of last year to a seasonally adjusted $206.8 billion in Q4 from $219.0 billion in Q3, revised from $217.1 billion. The Action Economics Forecast Survey anticipated a $214.0 billion deficit. It was the smallest deficit since Q2 2021. As a percent of GDP, the Q4 deficit decreased to 3.16%, the lowest since Q2 2020, from 3.41% in Q3. Exports of goods and services fell 3.2% q/q following a 1.9% quarterly gain in Q3. Imports of goods and services fell 2.7% q/q on top of a 3.0% q/q decline in Q3.
For all of 2022, the current account deficit set another new record of $943.8 billion versus $846.4 billion in 2021. The widening of the goods trade deficit more than accounted for the widening of the overall deficit in 2022. The services surplus was little changed while the increase in the surplus in primary income was almost completely offset by an increase in the deficit in secondary income,
In Q4, the deficit in goods trade widened to $272.4 billion from $269.3 billion in Q3, revised from $271.1 billion. Exports of goods fell 5.7% q/q, their first quarterly decline since Q2 2020, following a 1.4% quarterly increase in Q3. Quarterly declines were widespread across major end-use categories with auto exports the only category to post a meaningful increase (+6.0% q/q).
Imports of goods decreased 3.4% q/q on top of a 3.8% quarterly decline in Q3. Again, the decline was widespread across end-use categories. By contrast, the catch-all “other” category jumped 10.8% q/q, its first gain in four quarters. Auto imports edged up 0.6% q/q, their fifth consecutive quarterly gain.
The surplus on services trade widened $5 billion to $67.3 billion in Q4 from an upwardly revised $62.3 billion in Q3 (previously $60.5 billion). Exports of services rose 2.6% q/q following a 3.2% q/q increase in Q3. The gains were widely spread, led by transport (+6.3% q/q), travel (+8.1% q/q) and construction (+8.1% q/q). Services imports edged up 0.6% q/q after a 1.2% quarterly increase in Q3. Quarterly increases in travel, financial services, charges for intellectual property, and personal, cultural and recreational services were largely offset by declines in transport, construction, telecommunications, and other business services.
The surplus on primary income fell to $39.3 billion in Q4 from a downwardly revised $41.8 billion in Q3 (previously $45.6 billion). Primary income receipts rose 5.0% q/q while primary income payments increased a larger 6.7% q/q. The deficit on secondary income narrowed markedly to $41.1 billion in Q4 from $53.8 billion in Q3. Secondary income receipts jumped 19.2% q/q while secondary income payments fell 4.6% q/q.
On the capital flow side of the ledger, the net US acquisition of foreign financial assets fell $264.6 billion in Q4 following a downwardly revised $339.0 increase in Q3 (previously +$411.0 billion). The net incurrence of foreign financial liabilities also fell in Q4, declining $144.1 billion following a $487.3 billion increase in Q3.
Balance of Payments data are in Haver’s USINT database, with summaries available in USECON. The expectations figure is in the AS1REPNA database.
Sandy Batten
AuthorMore in Author Profile »Sandy Batten has more than 30 years of experience analyzing industrial economies and financial markets and a wide range of experience across the financial services sector, government, and academia. Before joining Haver Analytics, Sandy was a Vice President and Senior Economist at Citibank; Senior Credit Market Analyst at CDC Investment Management, Managing Director at Bear Stearns, and Executive Director at JPMorgan. In 2008, Sandy was named the most accurate US forecaster by the National Association for Business Economics. He is a member of the New York Forecasters Club, NABE, and the American Economic Association. Prior to his time in the financial services sector, Sandy was a Research Officer at the Federal Reserve Bank of St. Louis, Senior Staff Economist on the President’s Council of Economic Advisors, Deputy Assistant Secretary for Economic Policy at the US Treasury, and Economist at the International Monetary Fund. Sandy has taught economics at St. Louis University, Denison University, and Muskingun College. He has published numerous peer-reviewed articles in a wide range of academic publications. He has a B.A. in economics from the University of Richmond and a M.A. and Ph.D. in economics from The Ohio State University.
