Current-account deficit falls 9% in third quarter

— The current-account deficit in the U.S. narrowed in the third quarter, helped by slowing imports.

The gap, the broadest measure of international trade because it includes income payments and government transfers, shrank 9 percent to $107.5 billion, the smallest in almost two years, from a $118.1 billion shortfall in the prior quarter, the Commerce Department reported Tuesday. The median forecast of economists in a Bloomberg survey called for the deficit to narrow to $103 billion.

Cooling demand in the world’s largest economy is limiting imports at the same time that a slowdown in growth from Europe to China reduces overseas sales, a sign it’ll get harder to keep shrinking the trade deficit. The balance of payments gap also is a reminder the U.S. remains dependent on foreign investors for funding.

“When you get really large current-account deficits you worry about the dollar falling out of bed,” said Jay Bryson, a senior global economist at Wells Fargo Securities LLC in Charlotte, N.C. “That’s the good thing here. It’s not an accident waiting to happen.”

Estimates in the Bloomberg survey ranged from deficits of $98.5 billion to $116.1 billion. The second-quarter shortfall was revised to $118.1 billion from a previously reported $117.4 billion.

Stocks rose as investors watched for signs of progress in efforts by President Barack Obama and Republicans to reach agreement on a new budget. The Dow Jones industrial average rose 115.57 points to 13,350.96.

The gap represented 2.7 percent of gross domestic product last quarter, the smallest in three years and down from 3 percent in the prior quarter. The deficit reached a record high of 6.5 percent of gross domestic product in the fourth quarter of 2005.

Paul Ashworth, chief U.S. economist at Capital Economics, said most of the improvement reflected a decline in America’s foreign oil bill. He predicted that the deficit will remain close to 3 percent of the total economy or slightly below through all of next year.

The trade deficit in goods and services, which accounts for most of the current-account gap, fell to $124.5 billion from $137.4 billion in the past three months, Tuesday’s report showed.

More recent figures indicate the current account balance may help underpin the economy this quarter. Adjusted for prices, which are the figures used to calculate gross domestic product, the trade gap shrank to $46.2 billion in October from $46.6 billion in September, Commerce Department data showed Dec. 11.

A slowdown in overseas demand is clouding the outlook for some manufacturers. United Technologies Corp., the maker of Pratt & Whitney jet engines, this month forecast lower profit and sales next year than analysts projected.

“The challenging macroeconomic environment will continue,” Chief Executive Officer Louis Chenevert said at an analyst meeting on Thursday. He expects “solid growth in emerging markets, more growth in America, flattish in Europe.”

Tuesday’s report showed U.S. income on overseas assets was little changed at $184.4 billion in the third quarter, compared with $184 billion in the previous three months. Foreign earnings on U.S. assets, including wages and compensation, increased by $1.65 billion to $133.6 billion.

That left a $50.8 billion surplus on income payments, down from $52.1 billion in the prior quarter. U.S. investments overseas generally yield more than the Treasury securities that foreign investors prefer to buy, helping maintain the income surplus.

Payments by the U.S. government to foreigners and other private transfers abroad exceeded official inflows from overseas by $33.8 billion last quarter, compared with $32.7 billion in the previous period.

Information for this article was contributed by Alex Kowalski and Chris Middleton of Bloomberg News and by Martin Crutsinger of The Associated Press.

Business, Pages 28 on 12/19/2012

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