US Budget Deficit Hits $1.5 Trillion as Fiscal Year Nears End

• The US budget deficit exceeded $1.5 trillion with two months to go until the end of the fiscal year, down slightly on 2023 though vastly larger than pre-pandemic times. The $1.52 trillion gap for the 10 months through July was down 6% from the same period last year, Treasury Department data released Wednesday showed. For the month of July, the deficit was $244 billion — 16% smaller than July 2023, adjusted for calendar differences. The adjusted year-to-date narrowing was 5%.

• Higher revenues helped narrow the deficit. Receipts have risen in part because of a deferral of tax deadlines from fiscal 2023 into this year in states that suffered from natural disasters. Affected areas included most of California.

• The interest burden on outstanding US debt remained a major drag on the budget. Interest costs in the first 10 months of the fiscal year totalled $956 billion, up 32% from 2023. The Federal Reserve’s aggressive interest-rate hiking campaign, aimed at quelling inflation, has made debt more expensive to issue for the federal government.

• The weighted average interest rate on outstanding US interest-bearing government debt was 3.33% at the end of July — the highest since January 2010 and up about half a percentage point from a year before.

(Source: Bloomberg)