The Current Account for 2006

Brad Setser joins Steve Kyle on this $225 billion 2006Q3 current account deficit (or as Brad calls it, an annualized $900 billion figure). Actually, if 2006Q4 matches the average of the previous three quarters, we’ll be closer to $875 for the 2006 current account deficit. Looking at the details, exports of goods actually rose by 3.65%, while the increase in imports of goods was 3.72%. That does not sound like a big difference but remember that during 2006Q2, we exported only $252.843 billion in goods, while we imported $463.441 billion in goods. Our large current account gap only become wider last quarter – with the big debate being how should we narrow it?