Interpreting the U.S. Current Account Deficit

The U.S. current account balance is a summary of international transactions by firms, households, and local, state and federal governments involving currently produced goods and services. Table 1 lists the current account balance and its main components (cols. 1-4) at fiveyear intervals from 1960 to 1990 and annually from 1991 to 2003 (covering the first two quarters at an annual rate). The single main component of the current account balance is the balance of merchandise trade (col.2), which has been negative and on a rising trend in each year since 1991. Merchandise imports have exceeded merchandise exports by growing amounts. In contrast, sales of services have regularly exceeded imports of services over the decade (col.3), but constituted only a fraction of merchandise trade