US FY 2016 federal budget deficit likely to reach around $550bn

The US Federal government's January 2016 monthly budget surplus reached $55.2bn, as compared with $17.5bn in January 2015. It is moderately larger than CBO forecast of $50bn and consensus expectations. According to CBO analysis, the time-shifting of payments around the New Year distorted the cash-basis budget results, as a major Social Security benefits payment due in January was processed in December 2015. The CBO, after adjusting for the calendar effects, guesses that the January monthly surplus reached only $3bn more than in January 2015.

Cash-basis receipts increased 2.2% y/y, while spending declined 20.3% y/y. However, CBO stated that adjusted budget outlays rose 1.2% y/y. Payroll taxes and individual income drove growth in budget receipts. Net interest on the public debt of $5bn, social security benefits of $2bn, student loans of $5bn and other outlays of $1bn drove the $4bn in adjusted spending growth.

These spending growths were countered by outlays for refundable tax credits that dropped $7bn and outlays for the Department of Veterans Affairs that fell $2bn. The 12-month rolling deficit reached $405.3bn, as compared to $478.0bn in December. The FY 2016 federal budget deficit is likely to reach around $550bn.