WASHINGTON, Dec 16: The US current account deficit fell slightly in the third quarter on a jump in payments from foreign insurance companies for hurricane-related damage, the Commerce Department reported Friday.

The broadest measure of trade and capital flows, the current account gap, fell one per cent to $195.8 billion. The figure was narrower than expected on Wall Street, where analysts had predicted a widening to $205 billion.

The report marked the second straight quarter of a narrowing deficit after the current account reached a record $198.7 billion in the first quarter.

The deficit amounted to 6.2 per cent of gross domestic product, down from 6.4 per cent in the second quarter.

The decrease was due in part to claims by US companies from foreign insurance companies in the wake of the extensive damage caused by hurricanes Katrina and Rita, the government said.

The current account deficit is the broadest measure of the US economic balance sheet with the rest of the world. It encompasses both trade and capital flows.

The goods and services deficit widened to $182.8 billion in the third quarter from $173.6 billion in the prior three month period. Petroleum products amounted to 80 per cent of the rise in imports, officials noted.

Foreign official assets in the US rose by $38.4 billion in the third quarter.

Net foreign purchases of US Treasury bonds rose to $40.9 billion in the third quarter from $9.9 billion in the second quarter, according to the Commerce Department data.

Foreign purchases of U.S. equities rose to a record $160.7 billion from $114.1 billion, while purchases of corporate bonds rose to $99.5 billion from $80 billion.

The data shows “the current account deficit is well-financed by non-residents,” analysts at IXIS Corporate and Investment Bank said in a research note.

“This situation is unlikely to change anytime soon, since several Asian countries, including China, need to stabilize their currencies versus the dollar. To do so, they buy huge amounts of dollar-denominated assets.”

But the report noted that the narrowing of the current account gap “is attributable to factors, which won’t last,” and could reach $885 billion in 2006.

The high current account deficit highlights fears of economists that Americans are spending more than they are producing, and pressures the dollar.

Along with the US budget deficit, which amounted to $319 billion in the past fiscal year, the “twin deficits” require foreigners to pump money into the United States at an unprecedented rate.—AFP