WASHINGTON (Reuters) -The U.S. current account deficit widened to a record high in the third quarter on strong growth in imports and lower income receipts, with some economists warning of a potential threat to a country already saddled with a large government budget deficit.
The Commerce Department’s Bureau of Economic Analysis said on Wednesday the current account deficit, which measures the flow of goods, services and investments into and out of the country, increased $35.9 billion, or 13.1%, to an all-time high of $310.9 billion last quarter.
Economists polled by Reuters had forecast the current account deficit would be $284.0 billion.
The current account gap represented 4.2% of gross domestic product, the highest since the first quarter of 2022, up from 3.7% in the April-June quarter. The deficit peaked at 6.3% of GDP in the third quarter of 2006, when the housing market boom was starting to unravel.
While the large current account deficit has little impact on the dollar for now, given its status as the reserve currency, economists warned that could change if the trend was sustained.
The U.S. budget deficit grew to $1.833 trillion for fiscal 2024, the highest reading outside of the COVID-19 pandemic and up 8% from fiscal 2023.
“One new element of the story is that the U.S. can no longer rely on generating a primary income surplus to help keep the deficit in check,” said Paul Ashworth, chief North America economist at Capital Economics.
“The upshot is that we should be worried about the twin government and external deficits, since both present a long-term risk of developing into a full-blown debt or currency crisis.”
Imports of goods jumped $23.7 billion to $837.2 billion, the highest since the second quarter of 2022. They were boosted by capital goods, mostly computer accessories, peripherals, and parts, as well as electric-generating machinery, electric apparatuses, and parts, and computers.
Consumer goods imports also rose, driven by medicinal, dental and pharmaceutical products. That far outpaced a $13.6 billion rise in exports to $530.0 billion, reflecting capital goods such as semiconductors, computer accessories, peripherals and parts, and civilian aircraft.
The goods trade deficit widened to $307.3 billion, the most since the second quarter of 2022, from $297.2 billion in the April-June quarter.
Receipts of primary income fell $15.5 billion to $345.7 billion, pulled down by a decrease in direct investment income, mainly earnings. Payments of primary income declined $3.8 billion to $361.2 billion, reflecting decreases in direct investment income, mainly earnings.
Portfolio investment income also fell, mostly reflecting interest on long-term debt securities. The primary income surplus has swung into deficit in recent quarters, posting a record $15.496 billion shortfall in the third quarter. That followed a $3.828 gap in the second quarter.
Receipts of secondary income edged up $0.2 billion to $50.2 billion, lifted by private transfers, mostly insurance-related transfers. Payments of secondary income increased $16.1 billion to $112.0 billion, reflecting an increase in general government transfers, mainly international cooperation.
The deficit on secondary income widened to an all-time high of $61.871 billion from $45.978 billion in the second quarter.
