The U.S. current-account trade deficit, the broadest measure of trade, narrowed in the third quarter to the smallest level in nearly two years as the gap in goods and services shrank, the government reported Tuesday. The Commerce Department said the current-account deficit—which measures the flow of goods, services, and investment into and out of the country—fell to $107.5 billion, the lowest since the fourth quarter of 2010, from $118.1 billion in the April-June period. The improvement in the current account in the third quarter reflected a drop in the deficit on goods and a small increase in the surplus on services, led by a gain in foreign earnings made by U.S. firms providing financial services, insurance, and professional services. The third-quarter deficit on goods and services fell to $124.5 billion from $137.4 billion the previous quarter. The surplus on income fell to $50.8 billion from $52.1 billion in the second quarter. The current-account deficit, watched by economists as a sign of how much the United States needs to borrow from foreigners, fell to 2.7 percent of gross domestic product (GDP) in the third quarter, the smallest level since the second quarter of 2009, and down from 3.0 in the second quarter. The current-account deficit reached a peak of 6.5 percent of GDP in the fourth quarter of 2005, partly because of a significant increase in the volume of oil imports. The deficit hit a record high of $880.6 billion in 2006, then shrank after a deep recession reduced U.S. demand for foreign goods by a greater amount than U.S. exports diminished. The trade deficit began widening again after the recession ended in mid-2009.
