WASHINGTON (Reuters) -The U.S. current account deficit contracted within the fourth quarter, but the advance may very well be temporary as goods imports surged to a record high in January, driven by businesses preemptively buying foreign merchandise to avoid tariffs.
The Commerce Department’s Bureau of Economic Evaluation said on Thursday the present account deficit, which measures the flow of products, services and investments into and in a foreign country, narrowed $6.3 billion, or 2.0% to $303.9 billion.
Data for the third quarter was revised to point out the deficit widening to a record high of $310.3 billion as a substitute of $310.9 billion as previously reported. Economists polled by Reuters had forecast the present account deficit rising to $325.5 billion within the fourth quarter.
The development reflected the first income balance swinging back into surplus.
The present account gap represented 4.1% of gross domestic product, down from 4.2% within the July-September quarter. The deficit peaked at 6.3% of GDP within the third quarter of 2006, when the housing market was beginning to crumble.
The present account deficit widened $228.2 billion, or 25.2%, to a record $1.13 trillion in 2024. It represented 3.9% of GDP, the best since 2022 and up from 3.3% in 2023.
The big current account deficit has little impact on the dollar for now, given its status because the reserve currency. But economists have cautioned that the widening gap and ballooning federal government budget deficit posed a risk to the greenback.
Imports of products increased $5.7 billion to $845.3 billion within the fourth quarter, boosted by nonmonetary gold, which offset a pointy decline in capital goods. Imports of services increased $4.8 billion to $211.0 billion, lifted by personal travel.
Goods exports fell $10.8 billion to $519.2 billion, pulled down by declines in civilian aircraft, computer accessories, peripherals and parts in addition to semiconductors.
There have been also decreases in consumer exports like medicinal, dental and pharmaceutical products. Exports of services increased $7.7 billion to $287.1 billion amid rising charges for the usage of mental property and travel.
The products trade deficit widened to $326.1 billion, the best level for the reason that first quarter of 2022, from $309.6 billion within the July-September quarter.
The products trade deficit hit an all-time high of $329.5 billion in January as businesses front-loaded imports in anticipation of broad duties from President Donald Trump’s administration. Trump has announced a raft of tariffs, though some duties were then delayed until April.