The US current account deficit narrowed more than expected in Q2 15, to $109.7bn from a revised $118.3bn in Q1. Forecast ($113.0bn) and the consensus ($111.5bn) had looked for a modest narrowing in line with the monthly trade statistics; however, this morning's data reflect improvements in the balance on primary and secondary income as well. Revisions, primarily to trade data, pushed the Q1 deficit up by a bit more than we had expected to $118.3bn.
The trade deficit profile continues to reflect a temporary and sharp widening in the trade deficit, which attribute primarily to the West Coast port strikes. Following the resolution of these strikes, the trade deficit narrowed by $4.3bn in Q2. The balance on primary income, which includes investment income and international compensation payments, improved by $0.9bn to a surplus of $50.6bn (previous: $49.7bn). The balance on secondary income, or transfer payments, improved by $3.4bn to a deficit of $30.3bn (previous: $33.8bn).
"We see both of these movements as consistent with the modest strengthening of the trade-weighted dollar from the first to second quarter. On net, the current account deficit narrowed to 2.5% of GDP in Q2 from 2.7% in Q1",says Barclays.
