July U.S. bud­get deficit falls sharply; fluke cited

Congress is fac­ing a dead­line of Oct. 1 for get­ting a bud­get ap­proved for the next fis­cal year or face the prospect of a gov­ern­ment shut­down. Law­mak­ers are ex­pected to pass a stop­gap spend­ing mea­sure to buy time to iron out dif­fer­ences.

Northwest Arkansas Democrat-Gazette - - NEWS - In­for­ma­tion for this ar­ti­cle was con­trib­uted by Paul Wise­man of The As­so­ci­ated Press and by Matthew Boesler of Bloomberg News.

WASH­ING­TON — The fed­eral bud­get deficit fell sharply in July from a year ear­lier, largely be­cause of a quirk in the cal­en­dar.

The U.S. Trea­sury Depart­ment said Thurs­day that the bud­get gap came in at $42.9 bil­lion last month, down from $112.8 bil­lion in July 2016. The bulk of the im­prove­ment came be­cause ben­e­fit pay­ments that nor­mally would have gone out in July went out in June this year be­cause July 1 fell on a Satur­day.

The Con­gres­sional Bud­get Of­fice is fore­cast­ing that the fed­eral deficit for the fis­cal 2017 bud­get year, which ends Sept. 30, will come in at $693 bil­lion, up from $584 bil­lion in bud­get year 2016.

Through the first 10 months of the bud­get year, the fed­eral gov­ern­ment is run­ning a $566 bil­lion deficit, up 11 per­cent from the same pe­riod of fis­cal 2016. Year-to­date tax col­lec­tions are up 2.3 per­cent, at $2.7 tril­lion, while spend­ing has risen by 3.6 per­cent, to­tal­ing $3.3 tril­lion, so far this fis­cal year.

The depart­ment re­ported that in­di­vid­ual in­come tax col­lec­tions through July to­taled $1.31 tril­lion, up from the $1.27 tril­lion col­lected over the same pe­riod a year ago. Year-to-date cor­po­rate in­come taxes rose slightly, from $231.9 bil­lion a year ago to $232.3 bil­lion.

Congress is fac­ing a dead­line of Oct. 1 for get­ting a bud­get ap­proved for the next fis­cal year or face the prospect of a gov­ern­ment shut­down. Law­mak­ers are ex­pected to pass a stop­gap spend­ing mea­sure to buy time to iron out dif­fer­ences.

Sep­a­rately, Fed­eral Re­serve Bank of New York Pres­i­dent Wil­liam Dudley on Thurs­day cau­tioned that “it’s go­ing to take some time” for in­fla­tion to rise to the cen­tral bank’s 2 per­cent tar­get even as he of­fered a gen­er­ally pos­i­tive out­look for the U.S. econ­omy, job mar­ket and price pres­sures.

“Our out­look an­tic­i­pates a con­tin­ued mod­er­ate growth trend, with some fur­ther strength­en­ing in the la­bor mar­ket and an in­crease in in­fla­tion over the medium term to­ward our ob­jec­tive of 2 per­cent,” he said in pre­pared re­marks in New York.

That lan­guage com­pares with the pol­icy-set­ting Fed­eral Open Mar­ket Com­mit­tee’s post-meet­ing state­ment on July 26, which said in­fla­tion was ex­pected to “sta­bi­lize around the Com­mit­tee’s 2 per­cent ob­jec­tive over the medium term.”

Dudley, who also serves as vice chair­man of the Fed’s Open Mar­ket Com­mit­tee, later ex­plained to re­porters that the year-over-year mea­sures would be con­strained by weak read­ings in re­cent months.

“I do think I ex­pect in­fla­tion to also start to move higher in the medium term but prob­a­bly not get all the way back to 2 per­cent on a year-over-year ba­sis, be­cause re­mem­ber, we’ve had these very weak in­fla­tion read­ings for a num­ber of months,” he said. “So we’re not go­ing to get to a year-over-year num­ber of 2 per­cent un­til some of these very low read­ings drop out of the sta­tis­tics 6 to 10 months from now.”

Fed pol­i­cy­mak­ers are ex­pected to an­nounce when they meet next month that they will be­gin par­ing down the U.S. cen­tral bank’s $4.5 tril­lion bal­ance sheet, which they built up af­ter the fi­nan­cial cri­sis in an ef­fort to stim­u­late the econ­omy by re­duc­ing long-term in­ter­est rates. They have raised their bench­mark in­ter­est rate four times since De­cem­ber 2015, but the chances of an­other in­crease this year have fallen to around 40 per­cent af­ter a string of gov­ern­ment re­ports that showed muted wage and price pres­sures in re­cent months.

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