The US Current Account Deficit

New figures were just released this morning about the US current account deficit during the April-June period of 2005. From the BEA release:

The U.S. current-account deficit–the combined balances on trade in goods and services, income, and net unilateral current transfers–decreased to $195.7 billion in the second quarter of 2005 (preliminary) from $198.7 billion (revised) in the first quarter. The decrease was more than accounted for by a decrease in net outflows for unilateral current transfers.

…Net recorded financial inflows–net acquisitions by foreign residents of assets in the United States less net acquisitions by U.S. residents of assets abroad–were $142.3 billion in the second quarter, down from $161.9 billion in the first. Financial outflows for U.S.-owned assets abroad picked up more than financial inflows for foreign-owned assets in the United States.

The rest of the world continued to finance the US’s immense borrowing needs during the second quarter of 2005. Much of this financing continued to come from foreign central banks, which accumulated $82bn worth of US assets, largely in the form of US government bonds and agency issues. But private foreign investors also poured money into the US to accumulate US stocks, bonds other than US Treasuries, and bank account balances, to the tune of some $310bn during the quarter. This represents the second-highest rate of private foreign investment in the US ever.