Current Account Deficit Improves in 2Q

WASHINGTON - The broadest measure of U.S. international trade improved slightly in the second quarter, narrowing to $195.7 billion as overseas earnings rose and Americans trimmed their appetite for imports, the Commerce Department reported Friday.

It was the first improvement in the current account deficit in a year, though the gap still ran at an annualized pace of $794.6 billion — a record — equal to about 6.3 percent of the total economy.

The current account measures not just trade in goods and services but also investment flows and foreign aid. Economists watch it as a gauge of how much the United States must borrow from abroad each day — currently about $2 billion — to finance the gap.

The second-quarter improvement came partly from a rebound in receipts on U.S.-owned assets overseas and a slowdown in the growth of imports. The merchandise trade deficit itself remained near record territory.

"One good quarter does not make a trend," a senior economist cautioned. "The underlying imbalance is still enormous, and Katrina-related oil imports could widen it again this quarter."

The dollar has held up this year despite the deficits because foreign central banks — especially in Asia — keep buying U.S. Treasury securities. Federal Reserve officials have warned the imbalance cannot grow forever without pressuring the currency or interest rates.

Treasury Secretary John Snow renewed his call this week for Europe and Japan to stimulate their own economies so they buy more American exports, and for China to let its currency rise further after July's small revaluation.

Economists surveyed expect the full-year current account deficit to approach $800 billion, up from $668 billion in 2004.