U.S. Current Account Deficit Hits Record $43.4 Billion

The government’s broadest gauge of America’s trade performance posted a record $43.4-billion deficit in the third quarter, the Commerce Department said Tuesday.

It was the first time since 1958 that the United States paid out more in stock dividends and interest to foreigners than was received from abroad.

The previous record deficit was a $41.2 billion during the second quarter. The current account includes not only merchandise trade but also financial transactions with the rest of the world and investment flows.

Last week, the Commerce Department reported that the merchandise trade deficit hit a record $17.6 billion in October, up from $14.1 billion in September.

Foreigners took advantage of the devalued dollar to invest in the United States. The result was, for the first time in nearly 30 years, the United States paid out more in service payments than it earned from investments abroad during the third quarter.

Foreign assets in the United States went up $18.4 billion to a total $68 billion in the third quarter, well ahead of the increase in U.S.-owned foreign assets of $14.3 billion, to a total $29.2 billion.

Payments to foreigners in dividends, interest and other forms exceeded income by $600 million in the third quarter, compared to net income of $1.5 billion for Americans from these sources in the second quarter.

A Commerce Department official said the last time such an outflow occurred, in 1958, was a period when the United States was spending large amounts to build up its military presence in Europe.

Despite the high level of activity by U.S. industries, which economic analysts say clearly results from a cheaper dollar, the United States continues to suffer mounting trade losses.

The deficit in merchandise trade during the third quarter expanded to $39.8 billion from $39.6 billion in the second quarter, and the shortfall between exports and imports has continued to grow since then.

The current account report showed that U.S. liabilities to private foreigners and to international financial institutions jumped almost threefold to $48.9 billion in the third quarter from $14.8 billion in the second quarter.

Relatively high U.S. interest rates were an incentive for foreigners to deposit funds with American banks, the department said.

The United States has become dependent on foreign inflows of capital to finance its huge budget deficits. Government spending exceeded income by $148 billion in the financial year ended Sept. 30 and was expected to hit $180 billion in the current year unless Congress approves budget-cutting proposals.

The current account figures suggest that foreigners are willing to lend money to take advantage of short-term high interest rates but that they trimmed long-term direct investment.