WASHINGTON — The US current account trade deficit narrowed in the July-September quarter to the smallest level since late 2010, but the improvement may not last.
The deficit fell to $107.5 billion in the third quarter, down 9 percent from the second quarter imbalance of $118.1 billion, the Commerce Department reported Tuesday. It was the lowest trade gap since the final three months of 2010.
The current account is the broadest measure of trade. It tracks the sale of merchandise and services between nations as well as investment flows. Economists watch the current account as a sign of how much the United States needs to borrow from foreigners.
Many economists predict the deficit will widen in coming quarters, in part because a global slowdown is dampening demand for American exports.
A debt crisis has pushed much of Europe into recession. The region accounts for about one-fifth of US export sales. And other major export markets, including China, India, and Brazil, have experienced slower growth.
The current account deficit hit a high of $800.6 billion in 2006. It then shrank after a deep recession reduced US demand for foreign goods by a greater amount than US export sales diminished. The trade gap widened again after the recession ended in June 2009.
The improvement in the current account in the third quarter reflected a decline in the deficit on goods and a small increase in the surplus on services, led by a gain in foreign earnings made by US companies providing financial services, insurance and professional services. The surplus on investment earnings narrowed to $50.8 billion, down from $52.1 billion in the second quarter.
The narrowing of the deficit in the third quarter left it at a level equivalent to 2.7 percent of the total economy, down from 3 percent in the second quarter. The third quarter deficit represented the smallest percentage of the economy since the spring of 2009 .