US current account deficit $1.5bn a day

[UpInArms]

http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1087373121074

The US current account deficit widened to $144.9bn (£80bn) in the first quarter - a record in dollar terms, and a sharp rise from the $127bn deficit in the fourth quarter of 2003.

The current account deficit, a broad measure of trade and investment flows, is equal to just over 5 per cent of US gross domestic product, an increase of half a percentage point from the previous quarter.

The deficit reflects the fact that US is spending more than it earns, as well as weak demand growth outside the US, which affects US exports. At current levels, the US needs to attract more than $1.5bn of net investment per day from abroad to cover the current account shortfall.

The wider-than-expected deficit put pressure on the dollar, which declined against a basket of currencies and reached a six-week low against the yen in morning trading.

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However, a change in behaviour among foreign investors could lead to a sharp decline in the dollar and a rise in long-term interest rates.

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