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The US budget deficit continues to fall

Traders have obviously little interest in such thing as budget figures, but long-term investors should pay attention to the fact that the situation with the US federal budget deficit continues to improve year by year. The United States keep their commitment to budget deficit reduction, and move in this direction ahead of forecasts.

Here are some figures. It’s just one and a half months left until the end of 2014/2015 financial year. Over the past ten months, from October to July inclusive, the US budget deficit (seasonally adjusted) was $428 billion against $ 460 billion for the same period last year (-7% y / y).

According to the latest forecast of the Congressional Budget Office (CBO) published this month, the US federal budget deficit for the current fiscal year amounts to $ 425 billion versus $483 billion in 2013/2014 financial year. In other words, it is expected that the absolute budget deficit for August and September could be reduced by $ 3 billion. This is quite feasible, since September usually registers budget surplus, due to quarterly tax payments. If so, deficit this fiscal year will fall to 12% y/y. This is a great success – especially if we remember that earlier the CBO predicted deficit growth this year, from $ 483 to $ 486 billion dollars.

By the way, at the end of the last fiscal year, the US budget deficit, was lower than forecast too. Budget Office initially predicted that it would amount to $ 492 billion and then even raised its forecast to $ 506 billion. As it turned out, the forecast was incorrect. The result proved to be even better than the initial forecast, amounting to, as mentioned above, only $ 483 billion.

As a result, the US state budget keeps developing positive trend (see. Chart 1). This increases market’s confidence in the stability of the US government debt and makes it more attractive in the eyes of investors. But how has Barack Obama managed to generate this positive trend?

united-states-government-budget-value14-8-15

There’s no big secret here. Just look at the following two charts (see. Charts 2 and 3).

The first chart shows the dynamics of the US fiscal expenditures. As you can see, since 2009, they almost haven’t changed and remained stable, at the same levels.

united-states-government-budget-value14-8-15

The second chart reflects government revenues. Here, on the contrary, we see an increase due to the tax revenues growth on the back of gradual economic recovery.

united-states-government-revenues14-8-15

Revenues are growing, the costs haven’t changed. As a result, although expenditures are still higher than the income, the gap is becoming narrower, and therefore, the US budget deficit continues to inch downward.

 

Dear traders, please post your comments to our forecasts and share your own opinion. Your ideas can be very helpful for the newcomers in the forex market. Thank you!

Traders have obviously little interest in such thing as budget figures, but long-term investors should pay attention to the fact that the situation with the US federal budget deficit continues to improve year by year. The United States keep their commitment to budget deficit reduction, and move in this direction ahead of forecasts.

Here are some figures. It’s just one and a half months left until the end of 2014/2015 financial year. Over the past ten months, from October to July inclusive, the US budget deficit (seasonally adjusted) was $428 billion against $ 460 billion for the same period last year (-7% y / y).

According to the latest forecast of the Congressional Budget Office (CBO) published this month, the US federal budget deficit for the current fiscal year amounts to $ 425 billion versus $483 billion in 2013/2014 financial year. In other words, it is expected that the absolute budget deficit for August and September could be reduced by $ 3 billion. This is quite feasible, since September usually registers budget surplus, due to quarterly tax payments. If so, deficit this fiscal year will fall to 12% y/y. This is a great success – especially if we remember that earlier the CBO predicted deficit growth this year, from $ 483 to $ 486 billion dollars.

By the way, at the end of the last fiscal year, the US budget deficit, was lower than forecast too. Budget Office initially predicted that it would amount to $ 492 billion and then even raised its forecast to $ 506 billion. As it turned out, the forecast was incorrect. The result proved to be even better than the initial forecast, amounting to, as mentioned above, only $ 483 billion.

As a result, the US state budget keeps developing positive trend (see. Chart 1). This increases market’s confidence in the stability of the US government debt and makes it more attractive in the eyes of investors. But how has Barack Obama managed to generate this positive trend?

united-states-government-budget-value14-8-15

There’s no big secret here. Just look at the following two charts (see. Charts 2 and 3).

The first chart shows the dynamics of the US fiscal expenditures. As you can see, since 2009, they almost haven’t changed and remained stable, at the same levels.

united-states-government-budget-value14-8-15

The second chart reflects government revenues. Here, on the contrary, we see an increase due to the tax revenues growth on the back of gradual economic recovery.

united-states-government-revenues14-8-15

Revenues are growing, the costs haven’t changed. As a result, although expenditures are still higher than the income, the gap is becoming narrower, and therefore, the US budget deficit continues to inch downward.

 

Dear traders, please post your comments to our forecasts and share your own opinion. Your ideas can be very helpful for the newcomers in the forex market. Thank you!



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