The magic of dark matter
To the surprise of many, the US current account deficit actually shrank (marginally) in the third quarter of 2005.
The Commerce Department reported that the deficit in the U.S. current account totaled $195.8 billion in the third quarter. That was down 1 percent from the deficit in the April-June quarter of $197.8 billion, which had been a 0.4 percent improvement from the record deficit of $198.7 billion set in the first three months of the year.How this happened is of course the big question. The deficit on goods and services grew from -$186.9bn in 2005:II to -$197.9bn in 2005:III -- nearly 6% growth. The surplus on services grew from +$13.3bn to +$15.1bn, but this relatively small $1.8bn improvement was clearly not enough to outweigh the much bigger $11bn deterioration from the goods trade.
The third quarter figure was below the $205 billion imbalance that had been forecast.
The balance on income improved markedly, from -$1.5bn to +$0.5bn, but this is clearly small potatoes, too. The real shift came in the grab bag "private remittances and other transfers", part of unilateral current transfers, which went from -$15.3bn to just -$5.6bn in a single quarter.
Ah, dark matter.
Analysts said payments by foreign insurance firms to settle damage claims stemming from hurricanes Katrina and Rita accounted for most of the improvement.This is hardly a new phenomenon. In 2004:III the US current account deficit remained steady thanks almost solely to the $4.6bn improvement in "other transfers" associated with Hurricane Ivan. In 2001:III the current account deficit turned around $5.6bn thanks in large part to a $13.0bn turnaround in "other transfers" in the wake of 9/11.
Why talk about Euro-Disney when a major disaster hitting highly insured Americans seem to always do the trick?