U.S. current account deficit narrows despite forecasts

The U.S. current account deficit unexpectedly narrowed in the fourth quarter to $172.9 billion from a downwardly revised $177.4 billion in the third quarter, the Commerce Department said on Monday.

Analysts were expecting the current account gap to widen to $184.1 billion.

The fourth-quarter current account deficit equaled 4.9 percent of gross domestic product, down from 5.1 percent in the third quarter.

For the full year 2007, the current account deficit dipped to $738.6 billion from $811.5 billion the year before, marking the first annual decline since 2001. For the full year, the gap was 5.3 percent of GDP, versus 6.2 percent in 2006.

The current account of the balance of payments is the sum of the balance of trade (exports minus imports of goods and services), net factor incomes (such as interest and dividends) and net transfer payments (such as foreign aid).

The current account balance is one of two major metrics of the nature of a country's foreign trade (the other being the net capital outflow). A current account surplus increases a country's net foreign assets by the corresponding amount, and a current account deficit does the reverse. Both government and private payments are included in the calculation.

The current account is the broadest measure of U.S. trade with the rest of the world and includes goods, services and income flows.