The U.S. current account gap widened
The U.S. current account gap widened to a narrower than expected $124.1 in Q1, following revisions back through 2014 (and through 2010 for some series) that lowered the deficits overall. Analysts saw revised gaps of $116.1 (was $128.2) B in Q4 and $103.4 (was $101.5) B in Q3. The widening in the gap over the past two quarters reflected a widening in the deficit for goods, and big gains for both exports and imports that were larger for imports. Analysts expect the current account gap to drop back to the $110 B area in Q2 thanks to ongoing strength in exports but a moderation in import growth. As noted in today's report, the new tax law had a huge but largely offsetting impact on the export sub-components for direct investment income receipts, as firms faced a one-time tax on accumulated foreign earnings, but no longer faced a tax on repatriated earnings starting in Q1. As such, direct investment earnings revealed a Q1 surge in dividends to $305.6 B thanks to a big gain in total repatriation, but a plunge in reinvested earnings to -$175.0 B as income was repatriated rather than reinvested. Analysts expect a widening in the annual current account deficit to $461 B in 2018 from gaps of $449 (was $466) B in 2017, $433 (was $452) B in 2016 and $408 (was $435) B in 2015, versus an $806 B record-high gap in 2006.