US Reports A Wider Budget Deficit Than Expected

Washington dc capitol dusk shadowREUTERS/Eric ThayerPeople arrive at the National Mall for the inauguration of U.S. President Barack Obama in Washington January 21, 2013.

The Treasury Department has just published its
monthly budget statementfor July.

The U.S. posted a deficit of $US97.6 billion.

Spending of $US297. billion more than offset receipts of $US200.0 billion.

Wall Street economists were expecting a deficit of $US96 billion, which was the amount also forecasted by the Congressional Budget Office (CBO).

This is up from $US79.6 billion in July 2013.

However, adjusting for a calendar issue, the deficit was actually smaller on a year-over-year basis.

“Some payments that would normally have been made in July 2012 were instead shifted into June 2012 for calendar reasons, lowering the July 2012 deficit by $US36B,” said UBS’s Maury Harris.

Adjusted, the July deficit was narrower than last July’s deficit by around $US9 billion.

“Fiscal policy restraint is reflected in a much narrower budget shortfall this year than last.”

“On an underlying basis, spending remained well contained, with defence likely to be down significantly as sequester cuts continued,” said Morgan Stanley’s Ted Wieseman in a note to clients on Friday. “On the revenue side, withheld income and payroll taxes gained an estimated 15%, boosted substantially by higher payroll and income tax rates this year but also showing underlying improvement.”

“For all of fiscal year 2013 ending in September, we see the deficit on pace to narrow to $US680 billion from $US1.1 trillion in fiscal 2012, falling as a share of GDP to 4.1% from 6.8%,” added Wieseman.

In June, the U.S. reported a massive $US116.5 billion surplus, the biggest surplus since April 2008.

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