Big gains in exports and overseas investment income narrowed the U.S. current account deficit to the lowest level in 14 years in the October-December quarter.
The imbalance fell to $81.1 billion in the fourth quarter, down from $96.4 billion in the July-September quarter, the Commerce Department said Wednesday. That's the smallest gap since the third quarter of 1999.
The current account is the country's broadest measure of trade, covering not only goods and services but also investment flows. A smaller trade deficit usually means that U.S. companies are producing more to meet domestic and overseas demand.
Goods exports rose 1.9 percent to $405.4 billion, driven by higher overseas sales of petroleum and agricultural products.
Americans received $206.1 billion in overseas income, mostly from investments, a 4.3 percent increase from the previous quarter. Payments to overseas owners of U.S. assets rose 2.4 percent to $137.8 billion. That helped push the U.S. income surplus to $64.4 billion.
As a percentage of the U.S. economy, the current account deficit declined to 1.9 percent, the lowest since the third quarter of 1997.
Two trends have helped narrow the gap in the past several years. The U.S. has benefited from an oil and gas boom because new drilling technologies have made it feasible to drill in states such as North Dakota and Pennsylvania.
That has pushed down the trade deficit by boosting petroleum exports and lowering oil imports. The deficit in goods and services trade fell to a four-year low in November. It has widened slightly since then.
Secondly, low U.S. interest rates have reduced the payments foreigners have received on their holdings of U.S. Treasury bonds and other investments. Meanwhile, the payments that Americans receive on overseas investments have risen, boosting the nation's investment surplus.
The monthly trade deficit, which covers merchandise and services, widened a bit in January, as Americans imported more food, machinery and petroleum.
The economy grew at a 2.4 percent annual pace in the final three months of last year, down from a healthy 4.1 percent rate in the July-September quarter.
Growth will likely weaken in the current January-March quarter, to about 2 percent, but most economists expect it will then pick up to a 3 percent pace for the rest of the year.