Highlights of the US Current Account

The US Q1 current account figures were reported today and may have been lost in the shuffle with the unexpected Norwegian rate cut and the US CPI figures. Here are the highlights of the report:

• The preliminary deficit for Q1 stands at $101.5 bln, which is the smallest since Q4 01, but was still a bit larger than expected. The improvement from Q4's $154.9 bln deficit can be fully accounted for by the smaller goods trade deficit.

• The trade deficit narrowed to $91.2 bln from $144.5 bln in Q4 08. The goods deficit narrowed to $124 bln from $178.8 bln in Q4 08.

• Although the US is a net debtor (foreign investors own more US assets than Americans own of foreign assets), it tend to run a surplus on investment income. In Q1 that surplus stood at $19.3 bln, down slightly from the $21.1 bln in Q4.

• Turning to the capital account, net financial inflows were $47.1 bln in Q1 down from $88.3 bln in Q4 08. An important development here was the American's purchased a net $35.3 bln of foreign assets in Q1 after having liquidated $70 bln worth in Q4 08. American's bought $1.5 bln of foreign equities after selling $35.1 bln worth in the prior quarter. Americans nearly completely replaced the bonds they sold in Q4 08. Specifically, Americans bought $33.8 bln of foreign bonds after selling $34.9 bln previously.

• US foreign direct investment increased $24 bln in Q1 after increasing $84.5 bln in Q4 08.

• Foreign owned assets in the US declined by $78.1 bln in Q1 after a $11.9 bln decrease in Q4 08.

• Foreign purchases of US Treasuries was estimated at almost $57 bln, down from $81.5 bln in Q4 08. Foreign sales of Agency bonds more than doubled to $45.3 bln. Their sales of corporate bonds in creased by four-fold to $15.5 bln. However, foreigners bought $6 bln of US equities in Q1 after selling almost $4 bln in Q4 08.

• Foreign direct investment in the US increased by $35.23 bln in Q1 after increased $96.8 bln in Q4 08.

• The statistical discrepancy, a plug-factor, used to make the balance of payments balance stood at $55.1 bln in Q1. In Q4 08 it stood at $67.2 bln.