US Budget: Some reversal from last month’s deficit can be expected - Nomura

Analysts at Nomura suggest that since 2013, the monthly budget statement in June has posted a modest surplus, so some reversal from last month’s deficit may not be unexpected.

Key Quotes

“In May, the Treasury Department reported a budget deficit of USD88bn, reflecting an 18.7% y-o-y increase in outlays and a 7.0% y-o-y increase in receipts. The fiscal year-to-date deficit of USD433bn now sets above last year’s reading of USD405bn. Markets have paid above-average attention to the monthly Treasury statements given the upcoming fiscal deadline to raise the debt ceiling.”

“Earlier this year, the CBO noted that receipts were coming in below expectations, possibly reflecting strategic behavior by consumers expecting lower tax rates in the future. However, they noted that the “sources of the shortfall will be better understood as data from tax returns start to become available later this year.” Recently, the CBO stated that its estimated “X date,” or date at which the debt ceiling will be breached, remains unchanged from an earlier estimate at early to mid-October.”