US current account deficit shrinks in the fourth quarter of 2016

America's current account shortfall shrank at the end of 2016 on an increase in receipts from investments made abroad.

The total US current account deficit improved from -$116.0bn in the third quarter to -$112.4bn for the fourth quarter, according to the Bureau of Economic Analysis.

Economists had penciled a sharp rise to -$128.6bn, however, the third quarter deficit was revised to show $116.0bn of red ink, worse than an initial estimate of -$113.0bn.

As a proportion of US gross domestic product, the current account deficit slipped from 2.5% in the third quarter to 2.4% in the fourth.

The surplus on the primary income balance, which tracks earnings on investments made overseas, grew by $19.9bn to reach $61.5bn, although it was largely offset by a $17.5bn widening in the deficit on trade in goods.

The total deficit on trade in goods and services on the other hand decreased by $16.0bn to -$132.3bn.

On the other side of the balance payments, the financial balance flipped to a net liquidation of $79.1bn from $28.3bn of net purchases.

"We take little signal on economic activity from the current account balance, especially given that the release comes out well after trade data for the relevant period," said Rob Martin at Barclays Research.