Our new Marketplace Crash Course is here to help. Sign-up for free, learn at your own pace.
The Commerce Department just released big news about the U.S. current account deficit, the measure of the flow of goods and services into and out of this country. The deficit has reached a 14-year low, down to $81.1 billion.
The simplest way to think of the current account deficit is as a gap. It’s the value of all the stuff and money the U.S. sends overseas, minus what it imports. Right now the U.S. is importing $81.1 billion more in goods and services than it is exporting. But this is $215 billion less than the peak in 1999.
The main reason, says economist Robert Scott at the Economic Policy Institute, is that the economy is weak and therefore interest rates are low. That means the U.S. is paying less to foreign countries that hold U.S. Treasuries. That means less cash leaving the country, headed overseas.
A weak economy also means a weak dollar, which makes U.S. products more attractive to foreign countries, so they are buying more American goods. Another big reason for the deficit drop is the U.S. energy balance. “In recent years the U.S. has had a boom in unconventional energy production domestically, gas but also oil,” says Gian Maria Milesi-Feretti , deputy director of research at the International Monetary Fund.
Oil and gas production continues to increase this year, and much of that energy will probably be exported. That growth, along with an expected decline in imports, means the deficit is likely to continue its decline.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.