Merk Investments: Current Account Balance Q2 2008

The current account balance for the second quarter of 2008 saw an increase in the deficit to -$183.10 billion vs. the -$175.6bln recorded during the first three months of 2008. The 4.3% increase in the current account deficit was accompanied by a 1.9% increase in goods and services, a -17.7% decline in balance on income and a -5.7% fall in unilateral transfers. U.S. overseas purchases declined -142.4% and private direct investment fell -26.4%. Foreign investment in the U.S. fell -94.3%. All data is on a quarter over quarter basis.

The change in the current account is primarily due to the soaring cost of oil during the sampling period. The current account now stands at 5.1% of GDP, up from 5.0% previously. The trade gap, not adjusted for inflation, increased to -$180.6 billion, up from -$177.1 billion previously.

The data for the second quarter of the year reflected the increase in spending on energy related products and the necessity of net capital inflows to fund the nearly $2.0 billion per day gap in the current account. While the data did show deterioration in the second quarter, the recent decline in oil prices should provide some relief to the current account gap in during the third quarter of 2008.

This report was prepared by Merk Investments LLC, and reflects the current opinion of the author. It is based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any investment product, nor provide investment advice. Merk Investments does not own any of the stocks mentioned; this is not an offer to buy or sell any security mentioned.