Just a snapshot for now…commentary to follow:
Yes…that’s a $5B deficit compared to last year’s $62B surplus. It’s not good, but it’s also not quite as bad as it looks….
The US Cash Deficit for August 2016 came in at $151B bringing the 2016 cash deficit through 8 months to $476B.
Revenue:
Revenue was up 8% for an $18B YOY increase, though the two extra business days vs 2015 played a big part in that beat. Still, we’ll take it, and it brings the year to date to just $15B under last year with 4 more months to close the gap. Looking into the details, the story for the year is emerging…taxes withheld from paychecks are up a healthy 4%, but that gain is pretty much being offset with corporate taxes down 12% and taxes not withheld down 6%. Bottom line is that through 8 months, we are still down…and that’s bad news even though some of it is due to one time receipts in 2015. The only good news is that our largest source of revenue…taxes withheld from paychecks appears to be stable and growing at a solid clip. It’s not enough, but without that the numbers would be terrible.
Outlays:
For the month, outlays were up huge on timing as a lot of August 2015 outlays went out at the end of July due to how the weekend fell. What really matters is the year to date which is up 3%. That may not sound like a lot, but when the budget is a little over $4T a year, it adds up pretty quickly.
Deficit:
The monthly cash deficit was 151B bringing the year through 8 months to $476B. I think our bottom right chart tells the most intriguing story:
6 years straight of deficit improvement have come to an end barring an unlikely miracle over the next 4 months. Worst of all, it’s not a plateau…it’s up 25% YOY and headed for the ballpark of $600B for the full year
Summary:
Revenue was a little better than expected, but still negative on the year, and outlays are increasing at 3% YOY. September is a quarter end, so we should see healthy revenues and a moderate surplus in the $20B range for the month. Due to the way the weekend falls, October spending will get pulled into September, so the surplus will be far under last September’s $62B surplus, but October should make it up.
The US Cash Deficit for July 2016 came in at $101B for July, bringing the 2016 deficit through 7 months to $331B.
Revenue:
Revenue was down again, which of course is not a good sign, but thanks to the way the weekends fell, and July 4 falling on a weekend last year, July 2016 had 3 fewer business days than July 2015. Over the long run, it doesn’t matter so much, but that was always going to be a deep hole to dig out of, and obviously we just didn’t quite make it. Not to worry though, August 2016 gets 2 of them back, which should give us an excellent shot at reporting a healthy (looking) revenue gain in August.
Outlays:
Outlays were down big ($45B) YOY, but most of that was the timing of payments last year that were due in August, but paid in late July due to the way the weekend fell. If you back that out, and the 3 extra business days, the outlays would have been up, probably in the 3-4% range.
Deficit:
Thanks to the timing issue in 2015 that increased cost, the deficit for July was $33B lower than last year, but we should expect that timing event to reverse in August.
Summary:
Revenue stank, but it was probably just the business days issue. Cost looked good, but was all timing. Not a terrible month, but mostly just pushes our revenue question to next month. Looking forward to August, last year the deficit was $102B…this year I am looking for it to be about $150B as the timing shakes out, and hopefully we see some revenue growth in the 3-5% range.
Just wanted to add some commentary to the short June post last week. Here is the snapshot again:
Revenues:
Down $16B for the month…Withheld taxes were flat, but corporate taxes were down $12B, for a 16% reduction. Taxes not withheld were down $4B and 6%. For the year, revenues are down $21B, good for a 1.2% decline.
Outlays:
Outlays were up for the month +2.5% and for the year +3.2%. Social Security, Medicare, and Medicaid continue to dominate the increases
Deficit/Surplus:
For the month, we ran a surplus, which is great but generally expected in June as quarter end revenues flow in, and have given us June surpluses for 4 years straight. However, the true story can be told in our standard bottom right chart…the YTD deficit, which I have blown up below:
At the midpoint of 2016, it appears that 6 straight years of deficit improvement is likely to be reversed. But where to from here? I hesitate to guess, but there is a good sign, and that is that withheld taxes are up 3.8%, which would indicate rising employment and maybe even higher wages. Offsetting this bright spot is corporate taxes and taxes that were not withheld from paychecks. Those line items being down are certainly negative indicators, but still are dwarfed in magnitude by taxes withheld from paychecks ($1.2T vs $0.5T through 6 months)
Summary:
It was a bad month and bad first half of the year. Where we go from here will be determined by revenue. Looking at the timing, and putting some one offs behind us, with reported employment numbers looking good, and the stock market at or around record high’s, getting back to 3%+ YOY growth doesn’t sound impossible….fingers crossed.
Looking forward July will return us to deficit territory…last July posted a $133B deficit, though ~$40B of that was timing that was pulled forward cost from August. That should not repeat this year, so I am going to guess we will post an $80B deficit, which assumes a return to 3% revenue growth….stay tuned.
The US cash surplus for June 2016 came in at $19B compared to a $44B surplus in 2015 due to a decline in revenues and an increase in outlays.
I’m out of town and away from a decent sized monitor, so just a limited post for now. Basically, it was a pretty bad month. Revenue down, outlays up….and the year to date is starting to look ugly too…through 6 months, the deficit is $84B over last year, and revenue is still negative.