US Budget Deficit Hits Lowest Mark Since 2008

The US Budget deficit is at its lowest mark since the start of the recession, which is a good sign for economic recovery. According to the US Treasury, in the fiscal year at the end of September, the deficit reached $680 billion, which is just 4.1% of GDP. Just one year prior, this number was at 1.09 trillion, which was 6.8% of GDP. Despite all of the issues in Congress, particularly those that caused the government shutdown, the fiscal climate is actually showing signs of improvement.

The deficit has been steadily declining for some time now, nearly reaching the level that it was prior to the recession. During the recession, the deficit was at its peak, comprising roughly 13.3% of GDP, based on statistics from the International Monetary Fund. According to Treasury Secretary Jack Lew, the deficit has decreased in each of the past four years, and is now less than half of what it was when Obama took office. Government employees are hoping that this growth can help bridge the gap between the two sides of the debate on taxation and spending.

From an economic standpoint, this is good news for the market. Government uncertainty has certainly factored into the current value of equity. However, over the last year, the market has performed tremendously, which the declining deficit may have had a hand in. If Congress is able to continue to find resolution to some of its major budget issues, the market will react positively.

-Abhishek Parekh

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