Current Account Deficit Expands

Surging oil costs helped widen the U.S. current account deficit more than expected in the year’s second quarter and capital flows into the United States ebbed in July, two government reports showed Monday.

Meanwhile, a third report showed optimism among U.S. home builders sank to the lowest level in 15 years after decreasing in September for the eighth consecutive month.

The National Assn. of Home Builders said its sentiment index declined 3 points in September to 30, the lowest level since February 1991, when the economy was in recession.

The Commerce Department’s current account report and the Treasury Department’s capital flows report measure what world financial leaders call trade imbalances.

Some experts worry that the huge U.S. current account gap could trigger a rapid fall in the value of the dollar, sending shockwaves through the world economy.

The current account shortfall totaled $218.4 billion in the second quarter, the Commerce Department said, larger than Wall Street forecasts of $214 billion.

The government also raised its estimate of the first-quarter current account deficit to $213.2 billion from a previously reported $208.7 billion.

The current account is the broadest measure of U.S. trade with the rest of the world, including trade in goods and investment flows. The deficit totaled 6.6% of gross domestic output, the same as in the first quarter and down from a record 7% in the last three months of 2005.

The Treasury said net flows of capital to the U.S. fell to $32.9 billion in July, less than half of the U.S. trade deficit that month.

Analysts were expecting net inflows of $70 billion, and the smaller-than-expected July figure sparked fears of a waning appetite for U.S. debt.