What Does the Biggest Current Account Deficit Imply to the US Economy?

In seven years, the highest level of deficit in the broadest measure of US trade has been recorded in the last three months of 2015. The deficit of the U.S. current account has been narrowed to $125.3 billion in the last quarter, down by 3.5 percent from a deficit of $129.9 in the 3rd quarter, according to reports made by the Commerce Department on Thursday.

The deficit for 2015 rose to $484.1 billion, up 24.3 percent from 2014’s $389.5 billion. It was regarded as the biggest annual deficit recorded since 2007 when the deficit equaled $690.8 billion.

What does this mean?

This big deficit actually implies that the U.S. companies are struggling in their sales as they are experiencing a weakness in major economies around the world; because of stronger dollar, export sales have declined.

The current account is actually the broadest measure of U.S. trade primarily because it covers merchandise trades, as well as trades in services like legal fees and airline fares. Aside from that, it also covers the flows of investment between countries.

The increasing trade benefit have cut the overall economic growth by 0.6 percentage point in 2015, a critical reduction for an economy that reached a modest 2.4 percent growth last year, per measurement of the gross domestic product.

According to several analysts, the trading industry will definitely affect the economy’s growth this year as companies and other exporters, including farmers, are still struggling to sell and market their products in other countries worldwide.

Trade Deficit Becomes a Trending Topic

The trade deficit records have become a major trending topic in this year’s elections as Republican Donald Trump and Democrat Bernie Sanders are both arguing that the US has been affected by the failure of the U.S. government to negotiate and land deals that protect American jobs from being lost to other countries that use unfair trading practices.

The deficit in 2015 has been 2.7 percent of the total output of the U.S. economy, which is up from 2.2 percent of the gross domestic product in 2014.

This increase in the total deficit only tells us that there is a 2.4 percent rise in the deficit in merchandise. Meanwhile, the U.S. goods exports has declined by about 7.2 percent, which is the first yearly decline in goods exports since 2009, the year when the global economy has been struggling to come out from a deep recession.

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