US Q2 Current Account - Deficit falls sharply from pre-tariff record in Q1
The Q2 current account deficit of $251.3bn is slightly lower than expected and compares to a downwardly revised (though still record high) deficit of $439.8bn (from $450.2bn) in Q1. The Q2 deficit is the lowest since Q3 2023.
Goods and services data had already released. The goods deficit has plunged to $270.0bn from a Q1 deficit of $465.8bn in Q1 that was inflated by anticipation of tariffs and saw only a minimal revision here. The services surplus of $79.6bn was slightly below Q1’s $80.3bn but Q1 was revised significantly higher from $75.4bn.
The primary (investment) income balance deteriorated to a deficit of $7.7bn from $2.6bn in Q1 but Q1 was erased from $7.6bn. The deficit in secondary (transfers) income saw a modest increase to $53.2bn from $51.7bn. Here the Q1 outcome was not significantly revised.
The Q2 deficit is 3.3% of GDP compared with 5.9% in Q1. In 2024 the deficit was 4.1% of GDP. Trend in the deficit was rising ahead of the tariffs and it is unclear that tariffs will change that. July saw the trade deficit rise from Q2's lower levels.