U.S. budget gap shrinks through july on higher revenue

Staff Writer
Columbus CEO

(c) 2013, Bloomberg News.

WASHINGTON — The U.S. government posted a 38 percent smaller budget deficit in the 10 months through July than a year earlier, even as the shortfall last month was wider than economists forecast, the Treasury Department said Monday.

Outlays exceeded receipts by $97.6 billion last month, compared with a $69.6 billion shortfall in July 2012, the Treasury said in Washington. The result, reflecting a difference in the timing of payments in July last year versus this year, compared with the $96 billion median estimate in a Bloomberg survey of 27 economists.

In the fiscal year that ends Sept. 30, the Obama administration projects the federal deficit will shrink to $759 billion, the smallest gap in five years as a stronger economy bolsters revenue. Increased tax collections and payments to the Treasury from Fannie Mae and Freddie Mac as housing improves are taking the pressure off of Congress and the White House to achieve an agreement on dealing with spending, deficits or automatic budget cuts.

"The improvement in the federal budget deficit over the past year is the fastest on record and the result of rising revenues and shrinking outlays," Dean Maki, the New York-based chief U.S. economist for Barclays, wrote in an Aug. 9 research note. "Revenues are increasing because of income growth, a rising stock market, and higher tax rates, while outlays are shrinking because of budget cuts and lower unemployment."

For the first 10 months of the 2013 financial year that began Oct. 1, the nation's deficit narrowed to $607.4 billion compared with a $973.8 billion shortfall over the same period from a year before.

Monday's report showed revenue rose 8.4 percent in July to $200 billion from the same month a year earlier. Spending totaled $297.6 billion compared with $254.2 billion a year earlier, it showed.

The U.S.'s AA+ credit-rating outlook was increased in June to stable from negative by Standard & Poor's based on receding fiscal risks, less than two years after the company stripped the world's largest economy of its top ranking.

American employers added 162,000 workers in July, according to a Labor Department report Aug. 2. The jobless rate fell to 7.4 percent last month from 7.6 percent in June and was down from 8.2 percent a year earlier.

The Congressional Budget Office said Aug. 7 that last month's budget figures were "distorted by quirks of the calendar" such as July 1, 2012, falling on a Sunday, requiring government payments to be made in the previous month. Without that shift this year, the July 2013 deficit would have been $10 billion smaller than it was a year earlier, the CBO said.