The U.S. current-account deficit--the combined balances on trade in goods and services, income, and net unilateral current transfers--increased to $225.6 billion (preliminary) in the third quarter of 2006 from $217.1 billion (revised) in the second quarter. The increase was more than accounted for by increases in the deficits on goods and on income. The surplus on services increased, and net unilateral current transfers to foreigners decreased.
This is 6.8% of GDP. Most economists would say this level is unsustainable. I would agree.
Goods exports increased to $262.1 billion from $252.8 billion. The
increase resulted from increases in all major commodity categories.
Goods imports increased to $480.7 billion from $463.4 billion. The increase resulted from increases in petroleum and products and in most major categories of nonpetroleum products.
In other words, we aren't exporting our way out of the problem.
Income receipts on U.S.-owned assets abroad increased to $160.1 billion from $155.3 billion. The increase was largely accounted for by an increase in “other” private receipts (which consists of interest and dividends). Direct investment receipts also increased.
Income payments on foreign-owned assets in the United States increased to $162.2 billion from $155.8 billion. Direct investment payments, “other” private payments (which consists of interest and dividends), and U.S. Government payments (which consists of interest) all increased.
About six months ago there was a theory floating around called "dark matter". It essentially stated that US assets abroad traditionally paid more income than foreign owned assets in the US. Therefore, the trade deficit was actually OK. Anyway, the difference between income from US assets abroad into the US and foreign owned assets in the US going abroad has been decreasing for the last year or so, making the "dark matter" theory somewhat more suspect.
The dollar is one of the wild card I see in the US' economic future in 2007. This does not help the dollar's value in the long run.
