Explore further current and historical data for the Current Account Balance and how it relates to the exchange rate, real disposable personal income , and Real GDP.
Current and Historical Data for the Current Account Balance
Review the current and historical data for the Current Account Balance by quarter at Economagic.com.
Current Account Balance and the Yen per Dollar Exchange Rate: Annual Percent Change Relative to Same Period Last Year
Japan is one of the largest trading partners with the U.S. When the value of the dollar rises relative to the yen (the number of yen per dollar increases), Japanese goods become relatively less expensive for the U.S. to import, while U.S. goods become relatively more expensive for Japanese to import. Thus when exchange rates drive the current account, the U.S. current account balance should decline when the value of the dollar rises relative to the yen. As one can see in the diagram and the data table below, throughout the 1980's and into the early 1990's there tended to be an inverse relationship between changes in the U.S. current account balance and changes in the value of the dollar. Over time, a large structural current account deficit combined with low US interest rates puts downward pressure on the US dollar. Some of the USís major trading partners, such as China and Japan, have been buying up US dollars Ėdenominated assets such as US Treasury securities in order to offset the effects of the current account deficit on the value of the dollar, thereby maintaining strong demand for their goods and services in the US. The currencies of major exporters such as China and Japan will likely need to strengthen against the US dollar in order to reduce the USís large current account deficit.
The Current Account Balance and Real Personal Income: Annual Percent Change Relative to Same Period Last Year
One can see in the diagram below that rising real disposable personal income in the U.S. has helped fuel our consumption of imports. Specifically, the current account tended to be in deficit (imports exceeding exports) during times of growing real personal income as Americans used their rising affluence to finance the purchase of imports. Note that in each of the four recessions since 1980 (1981, 1982, 1990-91, and 2001, as well as the near-recession in 1995), the current account balance tended to increase, or at least decline more slowly, indicating that imports tend to decline during recessions. Conversely, in a recovery period, the current account balance declines faster as consumers in the U.S. purchase imports as well as other goods and services.
The Current Account Balance and Real GDP: Annual Percent Change Relative to Same Period Last Year
Recall that GDP can be measured as the sum of consumption spending, government spending, investment spending, and net exports. Net exports are the major component of the current account. When the current account balance is in deficit, declining net exports will make a negative contribution to real GDP. Thus one might hypothesize that real GDP and the current account will be directly related, moving up and down together. Notice in the diagram below that economic growth rates and growth in the current account balance tend to be inversely related, meaning that periods of economic slowdown in the U.S. also result in reductions in the current account deficit. One likely reason is that as real GDP in the U.S. slows or shrinks, real income and consumer confidence also deteriorate, causing Americans to buy fewer imports, which can serve to reduce the current account deficit, as described in the caption to the diagram relating changes in the current account to that of real personal income. This latter effect is easily seen for the 2001 U.S. recession in the chart below. As the current period of expansion continues, spending on imports has risen, which has worsened our current account deficit.