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U.S. Quarterly Trade Deficit Was the Smallest in 14 Years

The United States’ current-account deficit in the fourth quarter reached its lowest level in 14 years because of big gains in exports and overseas investment income.  The imbalance fell from $96.4 billion in the third quarter to $81.1 billion in the fourth quarter.  This is the smallest gap since the July-September quarter of 1999.

The current account measures goods and services, but also investment flows so a smaller trade deficit usually means that American companies are producing more to meet domestic and overseas demand.  Driven by higher overseas sales of petroleum and agricultural products, goods exports rose by 1.9 percent to $405.4 billion.  Overseas owners of United States assets received payments that rose by 2.4 percent to $137.8 billion.

Two trends have lead to the narrowing of this gap.  The United States have benefited from an oil and gas boom due to new drilling technology.  This new technology has pushed down the trade deficit by increasing petroleum exports and lowering oil imports.  Secondly, the low interest rates have reduced the payments foreigners receive on their holdings of United States Treasury bonds and other investments.  The low interest rates along with the increased amount of payments that Americans receive on overseas investments have led to the nation’s investment surplus.