U.S. current account deficit rises $9B US

The deficit in the broadest measure of U.S. trade rose in the first quarter to the highest point in more than a year as increasing global oil prices and a rebounding economy pushed up imports sharply.

The Commerce Department said Thursday that the current account deficit increased to $109 billion USin the January-March period, compared to a revised $100.9 billion US in the fourth quarter of last year.

The current account deficit is considering the broadest measure of tracking trade because it tracks the flow of goods and services between foreign nations as well as the flow of investment capital

The current account deficit narrowed to $378.4 billion in 2009, down a sharp 43.4 per cent from the 2008 deficit of $668.9 billion. The big drop reflected a deep recession in the United States, which cut demand for imported goods. But with the U.S. economy recovering, analysts believe the trade deficit will increase this year.

The eight per cent increase in the first quarter deficit marked the third straight quarterly increase in the deficit, which now stands at the highest point since the final three months of 2008.

The figure is watched closely by economists because it is a measure of how much the United States must borrow from foreigners to finance its balance of payments imbalance.

The 2009 deficit represented 2.7 per cent of the total economy as measured by the gross domestic product, the lowest level since 1998. The current account deficit hit a high of six per cent of GDP in 2006.

That had raised concerns over whether foreigners would continue to be willing to finance America's huge trade deficits. Now, the bigger concern is over foreigners' willingness to purchase U.S. Treasury securities to finance America's soaring federal budget deficits.

For the first quarter, the deficit in goods and services increased by $10.5 billion to $115.3 billion, reflecting higher-priced oil imports and increased imports of manufactured goods.

Offsetting this increase slightly was a rise in income earnings of $6.6 million to $41.7 billion. However, unilateral transfers, which include foreign aid, rose by $4.2 billion to $35.5 billion.

Economists believe that the current account deficit will continue to widen this year but will not climb to the previous record levels.

But there is some concern that the trade deficit could widen further than currently expected if the European debt crisis worsens, depressing economic activity more in a key U.S. export market.

For the moment, America's big exporting companies are optimistic that strength in other parts of the world such as Asia will be able to offset some of the weakness in Europe.

Caterpillar Inc., the world's largest maker of construction and mining equipment, announced earlier this month that it was boosting the company's quarterly dividend by five per cent, reflecting in part a brighter outlook for its sales because of the global economic recovery.

The company said it had ramped up production to meet higher demand for its heavy equipment, especially in developing countries.