U.S. current account deficit narrows in second quarter

WASHINGTON Reuters - The U.S. current account deficit narrowed sharply in the second quarter because of a surge in goods exports, data showed on Thursday.

The Commerce Department said that the current account deficit, which measures the flow of goods, services and investments into and out of the country, contracted 11.1% to $251.1 billion last quarter.

The current account gap represented 4.0% of gross domestic product, down from 4.6% in the January-March quarter. The deficit was 6.3% of GDP in the fourth quarter of 2005.

The United States is now a net exporter of crude oil and fuel. The deficit remains wide, but it has no impact on the dollar because of its status as a reserve currency.

Exports of goods went up $52.0 billion to $539.9 billion. They were boosted by shipments of industrial supplies and materials, mostly petroleum and products.

Exports were one of the few bright spots in the economy last quarter, helping to limit the drag on gross domestic product from a slowdown in the pace of inventory accumulation. In the second quarter, GDP contracted at a 0.6% annualized pace after declining at a 1.6% rate in the January-March quarter.

Imports of goods increased by $20.8 billion to $850.4 billion, reflecting petroleum products. Import growth has slowed as businesses assess their inventory needs against the backdrop of aggressive interest rate increases from the Federal Reserve.

Payments of primary income increased $16.2 billion to $255.5 billion, and primary income receipts rose $21.1 billion to $299.1 billion. Direct investment income was the driver of the increase in receipts. Interest was the main factor in the increase in payments.

Secondary income receipts went up by $1.4 billion to $43.6 billion, reflecting a rise in general government transfers, largely fines and penalties.

Payments of secondary income increased $4.0 billion to $84.9 billion due to rises in general government transfers, mostly international cooperation, and private transfers, mostly insurance related transfers.